Municipal Bond Forum
Early redemption
Q
First, I want to say that I thoroughly enjoy your columns. My question is concerning Early Redemption. As I understand it, most bonds are subject to early redemption. It seems that ER makes the yields completely unpredictable, as the bond issuer may redeem (call?) the bonds at any time regardless of the call features. Can you please comment?
A
James A. Klotz responds:
Most municipal bonds carry an “extraordinary” or “catastrophic” redemption feature, but are rarely exercised. These calls usually are exercised in the event of catastrophic circumstances causing the funded projects to be cancelled. The parameters for this type of call are outlined in the official statement.
Start here.
Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.