Bonds are a debt investment where the investor lends capital to the borrower in exchange for a fixed rate of interest. While a bond is held, it will typically make interest payments to the lender.
A bond’s movement in price is usually due to a change in underlying interest rates, but it may also change due to the public’s trust in the company’s ability to pay back the debt and continue as a going concern.
Assuming the bond’s price moves due to interest rates…a bond’s price will move inversely to interest rates. For example, if interest rates rise, then the price of the bond will decrease. Conversely, if interest rates decrease, then the price of the bond will increase.
When buying a bond in the open market, the bond will either be purchased at a premium to par value or a discount to par value. All that this means is that the purchase price will either be above or below the par value.