Pull to Par

Pull to par is the phenomenon where bond prices gradually move toward face value (100) as maturity nears, assuming no default. A premium bond (price >100) declines toward par over time; a discount bond (price <100) appreciates toward par. This happens because at maturity, all bonds redeem at exactly par — the present value of future cash flows (which includes par repayment) converges to par as time passes. For example, a bond bought at 105 will decline to 100 by maturity, while a bond bought at 95 will rise to 100. Pull to par is a key component of horizon return (roll-down effect). The rate of pull depends on time to maturity and coupon structure — zero-coupon bonds exhibit pure pull to par with no coupon cushion.