TL/DR: looked everywhere, no straight answer to the following:
If a bond costs £100 initially with £5 return for 10 years, it will fully return £150 after 10 years. (Wild example, I know)
Would someone at any point pay over £150 (or over how much it currently has left)?
If so, why?
In: Economics
The main reason that someone would pay over is if it is a government bond and they are more concerned about the money still being there at maturity.
UK/US are very unlikely to ever default, but private banks can and do go bust. For £150 that isn’t a problem as there is deposit insurance.
If you multiply the numbers by a million it starts to make sense.
Otherwise, the bond will be priced according to its remaining interest compared to market conditions, becoming cheaper when rates rise and vice versa.
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