Market Discount

The difference between the face value of a bond issued at par and the current below-par market price, plus any original issue discount. Market discounts occur when interest rates rise, thus causing bond prices in the secondary market to fall. 



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Market discount is not a set amount, but will vary from one bond to another according to market conditions. A bond sold for $1,000 will have a market discount when the yield on the bond rises and its value drops below $1,000.