medium · Debt Capital Markets bond-instruments-structures

A corporate treasurer is deciding between issuing a 5-year bullet bond or a 5-year bond callable after 2 years. The treasurer should choose the callable bond if they believe:

1. Interest rates will fall significantly in 2 years, allowing them to refinance at a lower cost.
2. Interest rates will rise, making the existing low fixed coupon worth keeping intact.
3. The company's credit rating is likely to be downgraded sharply within the coming two-year window.
4. They will hold essentially no excess operating cash available to redeem the outstanding notes early.

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