What is no par call curve in terms of muni securities ?

Can anyone explain how does it affect spread and duration and why is it used while evaluating securities ?

  • $\begingroup$ Thanks for explanation. If I price muni security with MMD curve or Non Par Call curve; what is better measurement ? $\endgroup$
    – Ocean
    Commented Jun 6, 2017 at 23:14
  • 2
    $\begingroup$ @AlexC please stop answering questions in comments. I really don't understand why you keep doing so and it leaves a lot of questions "unanswered"... $\endgroup$
    – SRKX
    Commented Jun 7, 2017 at 1:27

1 Answer 1


A callable bond can be called at specified dates; if the company decides to call it they will pay you a specified Call Price. The call prices are not necessarily equal to par (100) they may be 100+X and if so we refer to it as "non-par" call. The bond contract contains a schedule of these Call Dates and Call prices.

Obviously the possibility of a call has a major impact on the evaluation of a security. The best way to analyze this is to consider that the ability to call is an Option which the company has bought and which the investor has sold. The value of the bond is lower than the value of a non-callable bond (and the yield is higher) because of this. Given a mathematical model of interest rates the exact value of this option can be calculated and the OAS or Option Adjusted Spread can be found that takes the value of this option into account.

A simpler method is to compare the yield of this bond to the yield of other similar bonds. I am not a Muni expert but I believe the most common call arrangement for Munis is "callable after 10 years at Par". Most of the bonds included in the MMD index are presumably of this type. If you had an index of non-par callable bonds, it would be preferable since it would consist of bonds that are more comparable to the bond you are analyzing.


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