Bonds are not always issued at par, but they often are.

From a standard finance theory perspective, this cannot be justified. For investors, the division between coupon and principal returns is arbitrary: one should be able to adjust/structure them arbitrarily. For issuers, it would also be more convenient if they were able to structure payments to occur at times that are easier for them.

Then, why are bonds usually issued at par?

  • 2
    $\begingroup$ I think it is just tradition. A bond after all is a loan to the issuer. When people lend money, they expect some rent for the use of the money in the form of interest (which reflects current market conditions and the credit worthiness of the borrower); and if all goes well they expect to be paid the amount of money they lent to them, hence issuance at Par. $\endgroup$
    – AlRacoon
    Commented Jun 28, 2021 at 21:32
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    $\begingroup$ In 19th century France, Bonds were known as Emprunts d'Etat (State Loans). The state borrowed a certain amount from people and promised to reiumburse them the same amount at a future date, with interest payments in the mean time. Something very easy for the average person to understand (without having to know about present value, secondary market price, etc.). $\endgroup$
    – nbbo2
    Commented Jun 29, 2021 at 0:05

1 Answer 1


Zero-coupon bonds are sold at a price that's the fair value of their face value. When interest rates are positive, this means pricing at discount.

When an existing bond issue is tapped (re-opened), more bond with the same coupon and maturity is sold at whatever price is considered fair in the secondary market, not necesarily par.

Newly issued coupon bonds are almost always priced at close to par. During origination, the coupon is tweaked until enough bond investors are willing to buy it at a price close enough to par.

I may be wrong, but I'm not aware of any regulations requiring new coupn bonds to be priced close to par.

However, people buying bonds tends to be very conservative and afraid of innovation. If a bond issuer tried to sell a coupon bond at a price far from par, and it was not a tap of an existing issue, then a lot of potential bond buyers would simply be afraid to touch something that they're not used to, and the issuer would be forced to pay higher yield in order to sell the entire issue to fewer potential bond buyers.


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