What is the occurrence when the stated interest rate of a bond equals the market interest rate?

When the stated interest rate of a bond equals the market interest rate, it results in a par bond issuance. This scenario indicates that the bond is sold at its face value, which means investors are willing to pay the full amount because the return they will receive through interest payments matches what the market is offering for similar risk bonds.

When bonds are issued at par, the coupon payments made to bondholders correspond precisely to current market conditions, leading to no premium or discount in the bond’s price. This situation demonstrates a balance between the bond's interest rate and prevailing rates, reflecting neither an incentive for investors to pay more (a premium) nor a reason to seek a lower price (a discount).

Understanding this concept helps in distinguishing between various types of bond issuances and assessing bond valuation in relation to market movements.