deep-discount bond (redirected from Deep Discount Bond)

Deep-Discount Bond

1. A bond that sells at a significant discount from par value.

2. A bond that is selling at a discount from par value and has a coupon rate significantly less than the prevailing rates of fixed-income securities with a similar risk profile.

Notes:

1. Typically, a deep-discount bond will have a market price of 20% or more below its face value. These bonds are perceived to be riskier than similar bonds and are thus priced accordingly.

2. These low-coupon bonds are typically long term and issued with call provisions. Investors are attracted to these discounted bonds because of their high return or minimal chance of being called before maturity.

See also: Bond, Callable Bond, Coupon, Default, Junk Bond, Par Value

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Deep-discount bond

A bond issued with a very low coupon or no coupon that sells at a price far below par value. A bond that has no coupon is called a zero-coupon bond.

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deep-discount bond

1. A long-term debt security that, because of a low coupon rate of interest compared with current rates of interest, sells at a substantial discount from face value. Bonds of this type, if not originalissue discounts, are preferred by some investors because they are unlikely to be called before maturity. See also municipal convertible, zero-coupon bond.

2. See original-issue discount bond.