2.7.2.1. Current vs. Advance Refunding
A current refunding is one in which the refunded bonds are to be fully retired within 90 days after the refunding bonds are issued (specifically, within 90 days of the date that the new issue is closed). A current refunding may be done because interest rates have fallen, and the refunded bonds are within 90 days of a call date. In other cases, a current refunding may be done for bonds that are maturing within 90 days (usually in such cases the refunding was planned well in advance).
Suppose, however, interest rates have dropped significantly, and the next call date is not on the near horizon. In this case, the issuer may conduct an advance refunding, which is any refunding in which the refunded bonds are not retired within 90 days. An advance refunding allows the issuer to lock in the lower interest rates now without risking that they rise before the call date arrives.
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