At Par

What Is At Par?

At par means that a security's market price equals its par value. Par value is the nominal amount an issuer assigns to a security, also called its face value. A bond trading at par changes hands at the same price printed on its face.

The term is used most often in bond markets, but it also appears in discussions of preferred shares, common stock, and currencies.

How It Works

For a bond, par value is the amount the issuer promises to repay at maturity. It is also the base on which periodic coupon payments are calculated. When a bond is issued at par, the investor pays face value and receives the stated interest rate on that amount.

After issuance, a bond's price in the secondary market moves with changes in interest rates, the issuer's creditworthiness, and the time remaining until maturity. When the price returns to face value, the bond is again trading at par. Bonds trading away from par carry other labels:

• Above par: a premium bond
• Below par: a discount bond

For common stock, par value is usually a very small amount set in the company's founding documents and has little connection to the market price. As a result, "at par" is rarely a meaningful description for ordinary shares.

In currency markets, the phrase can describe a situation where one unit of one currency is exchanged for exactly one unit of another.

Why It Matters to Investors

Knowing whether a bond trades at par helps investors compare its price with the amount it will repay at maturity. A bond bought at par has no built-in gain or loss on principal if held to maturity, so its return comes mainly from coupon payments. A bond bought above or below par will have a different yield to maturity than its coupon rate, because the difference between price and face value is spread over the remaining life of the bond.

Par value also serves as a reference point for accounting, legal, and regulatory purposes, which is why the term appears in many financial documents.