medium · Debt Capital Markets pricing-yields-curve
What is the primary reason an issuer would include a 'Make-Whole Call' provision instead of a standard 'Fixed-Price Call' in an investment-grade bond?
- It automatically adjusts the coupon of the bond upward if market interest rates rise.
- It provides the investor with the right to put the bond back to the issuer at a premium during a rate rally.
- It minimizes the negative convexity of the bond, allowing it to trade more like a bullet bond and reducing the initial coupon cost.
- It allows the issuer to redeem the bond at a discount if their credit rating improves.
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