| Topic Name: |
bond conundrum |
| Message Name: |
if the price |
| Date Posted: |
02/27/2000 |
| In Reply To: |
If the price of the bonds go down, company A would have unrealized gains not losses (the debt is a liability not an asset). Thus, the situation is good/good not good/bad. There's no "binary" position, it's all good for company A. They locked in cheap financing before interest rates went up. |
| Message: |
Not quite correct as recent bond movements have reflected. For some strange reason, people in fixed income failed to see this coming yet the signs are everywhere. As usual-good news in Main street is not necessarily so on Wall Street and vice versa.
To revert to the conundrum, the last post assumed that the bonds in question have no call provisions. If they do, then the explanation would not hold. The firms would have to come up with more cash to redeem the bonds.
Fixed is et to be fun!
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