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What's the incentive for a company to call its bonds after the market interest rate has...

What's the incentive for a company to call its bonds after the market interest rate has dropped significantly?

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Answer #1

The Interest Rates in the market falls but if company does not call the Bond, it will continue to pay more interest to the bondhodlers i.e. Coupon. Here what corporates do is that they redeem the existing Bond with a little premium and issue new bonds in the market at the lower coupon Rate. It works in the advantage of the company as company saves the high Interest cost by redeeming the old Bonds and issuing the new ones.

Thats how cos take advantage of the fallen interest rates in the market.

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