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 ratchets the bond's stated fixed coupon upward whenever prevailing market interest rates climb higher.
- It grants the investor the right to put the bond back to the issuer at a stated premium during an interest-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 outstanding bond at a discount to par whenever its corporate credit rating subsequently improves further.
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