medium · Debt Capital Markets pricing-yields-curve
A corporate issuer is considering a 'make-whole' call to retire debt early. The bond is currently trading at a Z-spread of 120 bps, while the 'make-whole' spread in the indenture is fixed at 25 bps.
How would an analyst describe the economics of this call for the issuer?
- The issuer will benefit from the capital gain as the price pulls to par.
- The call spread ensures the investor is only compensated for the risk-free rate.
- The call is 'in-the-money' and should be exercised immediately.
- The call is extremely expensive and serves as a penalty for the issuer.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets pricing-yields-curve practice
- For a bond trading at a discount (below par), which yield measure is typically the same as
- If a bond's Yield to Worst is equal to its Yield to Maturity, what can we likely conclude
- If an issuer decides *not* to call a bond on the first call date even though it is economi
- If a bond's YTW is significantly lower than its YTM, the bond is likely trading at a:
- For a bond with several call dates at different prices, the Yield to Worst is:
- The concept of 'Pull to Par' describes the price convergence… — Which yield measure inhere
- If an investor buys a bond with a 5% coupon at a price of 102, how does the Yield to Matur
- A bond's yield to maturity (YTM) is 7%, but its current yiel… — What does this suggest abo