When the issuer first offers new issues, that first trading is done in the primary market, where the money raised from the sale of the bonds goes directly to the issuer for its use.

Subsequently, the bonds can be bought and sold among other investors, and this is referred to as the secondary market. The secondary market provides liquidity to buyers of the bonds who are now able to sell the bonds before the maturity date, should they wish to do so. The trading of bonds in the secondary market creates a market pricing of the bonds that depends on the supply and demand of the bonds, and the prevailing interest rates, among other factors.

When the market price of the bond is less than its par value, the bond is being sold at a discount. When the market price of the bond is more than its par value, the bond is sold at a premium.

	Investors purchasing bonds at the primary market know there is an avenue to sell off their bonds.
	The secondary markets provide a gauge for issuers to price their primary issues.