Series 50: Characteristics Of Advance Refunding

Characteristics of Advance Refunding

A current refunding bond allows the issuer to refinance within 90 days of a call date. If interest rates decline, an issuer will want to refinance by issuing new bonds at a lower rate. Suppose, however, interest rates have fallen significantly, and the next call date is not on the near horizon. An advance refunding bond allows the issuer to lock in the lower interest rates now without risking that they rise before the call date arrives and make the refunding less attractive.

For the