Which interest rate scenario will make it more likely for an issuer to call a floating rate bond?
Would an issuer be more likely to call a floating rate bond if the underlying future interest rate assumption forces the bond’s valuation to amount to something higher than the current call price?
Would there be any other consideration that would feed into whether an issuer will be more likely to call a bond given different future interest rate scenarios?
And how would an issuer’s probability of calling the bond impact the level of desirability of investing in that bond?
Ah, you're diving into the intriguing world of floating rate bonds and the strategic decisions issuers make regarding calls. Let's peel this banana layer by layer, shall we?
Interest Rate Scenario for Calling a Floating Rate Bond:
Valuation vs. Call Price Consideration:
Other Considerations for Calling a Bond:
Impact of Call Probability on Investment Desirability:
In the jungle of fixed income investing, understanding the interplay between interest rates, bond calls, and investment strategy is crucial. It's like knowing when to swing through the trees and when to sit tight. Always keep an eye on the broader economic canopy and the specific vines (bonds) you're swinging on!
Sources: Help Me Understand Fixed Income Investing, GP vs. LP Day, If you build it they will come | The Daily Peel | 11/18/21, Dalio's all weather Portfolio - Value Investing version, WSO Exclusive: Legerdemath - Anatomy of a Banking Trick
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