Question

Putable bonds are more likely to be called if interest rates have increased since the issuance of the bonds.” Is this statement correct? Explain please.

Answer 1

This statement is incorrect.

Puttable bonds are more likely to be put if interest rates have increased since the issuance of the bonds

Puttable bonds give the right to the holder to sell back the bonds to the issuer after a certain time period since issuance at a certain price usually at par or below par value. The holder will sell the bond back to the issuer if the market interest rates have increased since issuance which implies that the price of the bond has decreased since issuance.