# Why is the price of a 1 year to maturity bond so high?

I am looking at the 2½% Index-linked Treasury Stock 2024 bond and I can't understand why its price is so high (£377). There is only a year left!

• Can you quantify "too high", e.g. what do you expect as a price? Todays RPI-ratio is 3.69, and since inflation will not suddenly stop for the next year, 3.77 doesn't seem unreasonable. Commented Aug 25, 2023 at 23:22
• @Solarflare price discounted value of principal and coupons. The coupon is only 2 percent and while rates are high to be used with discount it should bring it below par. Commented Sep 5, 2023 at 11:12
• I asked this to figure out the direction an answer would have to go: do you think the price should be "100-some discount" (then the answer would need to explain how an index linked bond works, as D.Stanlay did) or do you think the price should be "373 instead of 377" (then the answer would probably require some math and market research, and also from you as "prior research", e.g. why you think its 373) or do you think the price should be "351 instead of 377" (then the answer (and your question) may need to analyze the likelihood that uk gets negative inflation during next year). Commented Sep 5, 2023 at 12:16
• @Solarflare yes I see now, so the part I missed is that it is in index linked bond. I just did understand what that means so I assumed the notional is 100, and roughly 102.5 payout in 1 year. If I discounted this at the current rate it would have been less than 100. As I understand the face is not 100 and that face has been changing it is value during the lifetime from inception. I thought only coupons were index linked but in this case so as the face? Commented Sep 5, 2023 at 12:49
• Yes, the value/payout at maturity is linked too (on 25th, it was 369, as I wrote in my comment). Commented Sep 5, 2023 at 13:17