medium · Debt Capital Markets pricing-yields-curve
If an issuer decides *not* to call a bond on the first call date even though it is economically beneficial to do so, what might happen to the bond's spread in the secondary market?
- The bond's quoted spread will immediately tighten all the way to zero.
- The price will rise sharply as investors reward the issuer for keeping the bond outstanding.
- The bond will be automatically upgraded by the rating agencies as a direct result of the decision.
- The spread will likely widen as investors perceive a 'non-call risk'.
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