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- 2011-7-11
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- 2013-9-12
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2#
发表于 2011-7-11 18:43
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"Companies call their bond when interest rate falls. They are referring to coupon rate here right? because they would be able to reissue bond at a lower coupon, therefore less coupon/interest payment for the company."
No, this is just the interest rate/discount rate for that bond. Coupon rates are generally correlated with these interest rates, but they don't drive the call behavior.
Basically, when rates fall, the value of bonds go up. So, issuers of bonds will have a greater liability to the bond holders. If there is a call provision, the issuers can buy back the bonds at at the strike price. So, when will they decide to exercise this call right? Obviously, when rates are low and bonds are expensive. |
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