Definition 1.
A bond with a coupon rate above, at or just slightly below current market interest rates. The bond is thus selling at around its par value (provided that the applicable required rate of return is almost the same as the coupon rate). If the market interest rate rises, and the bond's coupon rate is fixed, then the bond's price will decline. If the market interest rate falls and the bond's coupon rate stays fixed, then the bond's price will rise. |