Deep-Discount Bond

1. A bond that sells at a significant discount from par value.

2. A bond that is selling at a discount from par value and has a coupon rate significantly less than the prevailing rates of fixed-income securities with a similar risk profile.

Investopedia Says:
1. Typically, a deep-discount bond will have a market price of 20% or more below its face value. These bonds are perceived to be riskier than similar bonds and are thus priced accordingly.

2. These low-coupon bonds are typically long term and issued with call provisions. Investors are attracted to these discounted bonds because of their high return or minimal chance of being called before maturity.

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Bond selling for a discount of more than about 20% from its face value. Unlike a Current Coupon Bond which has a higher interest rate, a deep discount bond will appreciate faster as interest rates fall and drop faster as rates rise. Unlike Original Issue Discount bonds, deep discounts were issued at a par value of $1,000.