hard · Debt Capital Markets secondary-trading-liquidity
Why might an investor avoid a 'Deep Discount' bond (OID of 80.00 or lower) despite an attractive yield?
- A lack of liquidity in the secondary market for non-par bonds.
- The potential tax liability on the annual non-cash accretion.
- The fear that the bond price will never reach par.
- The risk that the coupon will be 'called away' by the issuer.
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