bond value converges to par at maturity

[sleepybird]

This is true only from accounting perspective, correct? In reality, do bond prices always converge to par? If so, then if I buy a bond today with the intention to hold to maturity, then I could careless about the bond price fluctuation in the interim. Can somebody clear this for me?

 

[Paraguay]

That is correct, bond prices converge to par over the long term.

 

[sleepybird]

thanks. in reality or just accounting?

 

[pfcfaataf]

both, remember that bond price is equal to par because par is what issuer pays to bondholder. fluctuation during lifeof the bond does not matter if htm except for reinvestment risk of coupon payments

 

[sa.86]

yes the pull to par concept applies to both real markets and accounting treatment. However contrary to accounting treatment, in real life I think the bond managers would be concerned about the duration, price movements and such even if the bond is held to maturity, wouldn't be a "couldn't care less what happens till maturity approach".