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Premiuim to par

Is a term to describe a bond that is being sold and traded above its par value and hence at a premium. This can happen for a variety of reasons but the most common reason is when interest rates being to fall. A bond will then trade at a premium as it will offer a higher coupon rate compared to the interest earned on similar risk-related assets i.e. the excess demand for bonds will force the bond to trade at a premium, but investors will be happy to purchase this as they want a bond that offers them a higher yield over similar risk assets.

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