May be obvious, but why will you never see a bond called at a discount from par?
Hi @Matthew! Good question that’s not super obvious.
It’s not that a bond couldn’t be callable at a discount. This technically could happen. For example, a bond callable at 99 ($990). However, it would be very difficult for the issuer to sell the bond. Call features are already risks for investors, and therefore callable bonds are offered with higher interest rates and yields. Making the bond callable at a discount would make the bond even less marketable and desirable.
To compensate for the call feature at a discount, the issuer would have to offer the bond at a higher interest rate and yield. There’s probably some situation where this may make sense, although I’ve never seen it in the real world.
Hope this answers your question!
That definitely makes things clearer, thanks B.