Pull to par describes an effect in which the price of a bond gradually approaches its nominal value as its remaining term decreases. The price of a bond can fluctuate sharply throughout its term and deviate significantly from its nominal value (100 percent). One reason for this can be, for example, rising market interest rates (bond price falls) or falling market interest rates (bond price rises), although the relationship between interest rates and bond prices is much more complex. However, provided the issuer is solvent, the bond will be redeemed at 100 percent on the date of maturity. Thus, the bond price gradually moves towards its face value as it approaches its maturity date. This effect is called pull to par. In addition, the effect of discounting the payment slumps as the remaining term to maturity decreases.
