A bond that is issued at a price above its face value (par value) or whose market price exceeds its face value. A bond trades at a premium when its interest rate (coupon rate) exceeds prevailing market rate of interest. A premium bond is a debt instrument that trades in the secondary market at a price above its face value.

For example, if the par value of a bond is USD 1,000 and it is currently selling at USD 1,100, this bond is said to be selling at a premium (with the difference being the so-called bond premium)