Trading a debt security like a bond/ note at a price lower than its par value (face value). Face value/ par value (also, principal) is the amount the debt security was issued for. It is the amount a debt security issuer promises to pay the buyer/ holder at maturity. For example, a $1000 par bond which is selling at $860 is said to be trading at a discount (hence it is known as a discount bond). The discount (bond discount) in this case is the difference between the par value and the below-par price (1000- 860= $ 140).

Fixed income securities, like notes and bonds, usually trade at a discount reflecting new market realities where interest rates are higher than the levels at which the securities were originally issued.

The opposite scenario is a debt security selling at a premium (above par).

At a discount is also referred to as below par.