Can somebody explain this in a very simple way . Thanks
Non Callable bonds are those which the issuer cannot call. Whereas Non Refundable bonds could be called when interests rate fall but against them the issuer cannot issue new bonds on lower yield.
Wouldn’t the issuer want to call the bonds back if interest rate rise to avoid paying more? What do you mean “against them”?
No. Assuming the issuer is paying a fixed rate (which most of the questions deal with), they would rather “refinance” when interest rates decrease. If interest rated increased, the issuer would be please that they are paying the lower fixed rate.
right, also if rates go down, bond prices go up, and it gets called for the reason wannabequant stated. Just another way to remember it.
Calling a bond means repurchasing it from the investor. Refunding a bond means repurchasing it from the investor with proceeds from selling a new bond at a lower interest rate. So a bond can be callable (taken out and the borrower’s debt reduced) but not refundable (taken out but replaced with new debt). See Morgan Stanley V. Archer Daniels Midland.