Why a Treasury Bond Can Trade Below Par Despite Rising in Price

Summary

The document presents a question about the meaning of a discount for an older U.S. Treasury bond. The quoted passage says the bond traded at 60 during 1970 and ended that year above 77, while describing it as available at a large discount. The questioner wonders whether the year-end rise means it had become a premium bond.

The excerpt supplies a bond price comparison but no answer or explanation. In bond terminology, a price below par remains a discount even if it has risen from a lower price; a price above par would indicate a premium. However, the document does not establish whether the quoted price convention, coupon, or passage context affects the specific interpretation. It is therefore a useful prompt for distinguishing a price change from the bond's price relative to par, but it does not provide a complete analysis of Treasury valuation or the tax treatment mentioned in the passage.

Key ideas

• A bond's price relative to par determines whether it trades at a discount or premium.
• A rise in price from an earlier level does not by itself establish that a bond trades above par.
• The passage cites a Treasury issue that moved from 60 to above 77 during 1970.
• The document poses the interpretation question but does not include an answer or supporting bond analysis.

Tags

# US bonds par value sold at a discount or at a premium? -- Intelligent Investor book question


# US bonds par value sold at a discount or at a premium? -- Intelligent Investor book question












I'm reading The Intelligent Investor by Benjamin Graham, and I came across the text below.

What I don't understand is: if the issues sold at 60 through 1970 but closed at 77 that year, wouldn't that mean they are selling at a premium? Why does the author say the issues are sold at a discount?

> In 1970 it was possible to buy a number of old issues at large discounts. Some of these are accepted at par in settlement of estate taxes. Example: The U.S. Treasury 3(1/2)s due 1990 are in this category; they sold at 60 in 1970, but closed 1970 above 77.

Thank you for reading!

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