Premium Bond
A bond trading above par value (price > 100).
A premium bond trades above par (price >100), meaning you pay more than face value. This happens when the bond's coupon rate exceeds current market yields — the high coupon makes it attractive, driving the price up. For example, a 6% coupon bond trades at 108 when market yields are 4%. Capital loss at maturity: Premium bonds decline to par by maturity — you lose the premium paid. Your total return comes from high coupons minus the amortization of the premium. Tax treatment: You can amortize the premium over the bond's life, reducing taxable income each year. Callable risk: Issuers often call premium bonds when rates fall, forcing reinvestment at lower yields (call risk).
Current Yield
Annual coupon income divided by the bond's clean price.
Running Yield
Annual coupon income divided by the bond's dirty price (clean price plus accrued interest).
Yield to Maturity (YTM)
The annualized return if you hold the bond to maturity, assuming all coupons are reinvested at the same rate.
Dirty Price
The total settlement price paid for a bond, including accrued interest.
Clean Price
The quoted bond price excluding accrued interest.
Accrued Interest
Interest that has accumulated since the last coupon payment, paid by the buyer to the seller.