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:
2030-09-17, callable from
2024-10-24, callable from
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?
- 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)?
- If the (dirty) price of
106.30with 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