Municipal Bond Forum
Pre-refunded bonds
Q
How likely is it that a pre-refunded bond is not paid back on the pre-refund date?
A
James A. Klotz responds:
Pre-refunded bonds are securities that are typically escrowed in U.S. Treasury bonds or other obligations of the federal government. The bonds in escrow come due on the pre-refunded date and represent the ultimate in safety. There is virtually no chance that these bonds will not be redeemed on their pre-refunded date. In rare cases, however, they may be called by the issuer prior to the pre-refunded date, if the optional call features were not defeased at the time of escrow.
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