kingstongal

Lets do an example.

Look at ORCL 4.95 4/15/2013. Bonds were issued 04/09/2008 at 5YR+220 with a make whole call at +35.

What this means is that at any time, Oracle could call the bond at the price corresponding to the benchmark treasury, which is T 2.5 03/13 + 35 bps.

This would be a terrible deal for the issuer in most markets as the make whole call is often a price signficantly above market. However, with tight spreads and a upward sloping yield curve, the MHC can become signifcant. For instance, this bond currently trades, maybe +40/+35.

The offer side is right about where the issuer has a MHC. Some issues have been called at wider spread/lower price than offer side