and what is refunding protection
Bonds can be called for any other reason than refunding For example ,Consider company has $1000 bond at coupon rate 8% with market rate of interest at 7%. Now imagine market falls to 6% So if the company has call option with its bond, it can call all it bonds and refund them at lower coupon rate of 6% leading to huge saving. So the refunding bonds are the ones for which bonds can be called but not refunded.
a bond is nonrefundable when the issuer can’t pay off the bond with proceeds from a separate issue. this is refunding protection. it’s mainly a protection against interest rate volatility. a company will want to issue lower coupon debt when interest rates decrease and will pay off callable bonds and issue new lower cost debt. if a bond is nonrefundable, the issuing company cannot do this. I think I’m right?
So am I wrong
i think we said the same thing, just in different ways.
3x to both of you.