SHORT ANSWER
The core idea
Bonds trade below par when investors require a return greater than the bond's coupon can provide at a par price, or when credit and liquidity concerns reduce its value.
THE MECHANISM
What is happening underneath
The discount allows capital appreciation toward redemption value if the issuer pays as promised.
MARKET INTERPRETATION
How investors should read it
A low price is therefore not automatically evidence of a bargain; it can reflect higher required compensation for risk.
BONDSTATS TAKEAWAY
The same market move can carry different information depending on which maturity, issuer and risk premium is changing. Read the question together with the underlying concepts rather than treating one price move as a universal signal.
RELATED CONCEPTS
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