Municipal Bond Forum
Calling bonds at a premium price
Q
A bond broker told me that if an issuer does not call a bond at a premium, say 103, and waits to call the bond at par, the issuer must still pay 103 to the bondholder. This doesn’t sound logical. Did I misunderstand him?
A
James A. Klotz responds:
As you concluded, this is not only illogical, it is inaccurate. Optional “call features” on municipal bonds usually offer a premium initially and systematically decline to 100.00. Theoretically, if the bond is not called at a premium price, the bondholder is compensated by keeping the bond for a longer period of time.
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.