# Misleading Yield (Callable Bonds with call price 100)

When looking at Callable Bonds, I've noticed that we often have a call price of 100 with a call date a few month before expiry. For example:

• US09681MAS70: coupon 2.625%, expiry 2030-09-17, callable from 2030-06-17 for \$100.0
• FR0013509627: coupon 2.000%, expiry 2024-10-24, callable from 2024-07-24 for €100.0

It seems one implication of this is that the bond holder will never actually receive 100 + coupon on expiry, as the issuer will always call the bond for 100 before that. Or in other words, the final coupon is effectively 0?

Questions:

1. Why are callable bonds (often) structured like this? Why not set the final call price to 100 + coupon? Or simply shorten the bond by one payment period (as we are skipping the final coupon anyway)?
2. If the (dirty) price of FR0013509627 is 106.30 with quoted yield 0.65%, then this yield calculation (via Street Convention) assumes no callable features (i.e. the yield calculation assumes the final coupon gets paid). Doesn't this mean the quoted yield is misleading? Since the bond will never actually pay the final coupon, shouldn't the effective yield be lower? E.g. somewhere around 0.15%?

• Just to double check. When the bond issuer calls the bond at its clean price 100, then the issuer actually has to pay the dirty price (= clean price + accrued). So if the bond was called e.g. 1 day prior to its expiry, the bond issuer would effectively pay 100 + coupon to the bond holder (ignoring the 1 day of accrued)? And not 100? Oct 14 '20 at 22:46