Fixed Income · Core
Par Value
Par value is the face amount the issuer promises to repay at maturity — 100 cents on the dollar in bond language.
Definition
Bonds are quoted as a percent of par. At maturity (if no default) you receive par plus the last coupon. Premiums and discounts are versus par, not versus what you paid last week. Inflation-linked bonds have an index-adjusted principal.
Why it matters
Pull-to-par is the path of a discount bond if yields stay put. Default is the event that par is not par.
Case
A 2022-issued 4% 10-year at 99-00. If yields fall, it trades through par; if they rise, the discount widens. Par is the destination only if you hold and they pay.
How to read it
Quote clean vs dirty. Inflation and amortizing structures change what ‘par’ means. Read the indenture.
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