Call Features and Redemption

What this video covers

• The five call features: optional, mandatory (sinking fund), partial, extraordinary (catastrophe), and make-whole, and how each one is triggered
• Why a mandatory sinking fund call is not optional, and why partial calls are decided by lottery or pro rata rather than by the bondholder
• When an extraordinary call can be invoked (natural disaster, condemnation, acts of God) and why falling interest rates never qualify
• Why callable bonds trade at higher yields than non-callable bonds, and how reinvestment risk drives that pricing
• The worst-case yield rule: quote yield to call (YTC) on premium callable bonds, quote yield to maturity (YTM) on discount callable bonds, always the lower number
• What a put feature does, why it shows up on variable-rate demand obligations (VRDOs), and why puts lower yields while calls raise them
• Who makes the first move when rates fall, and which side faces reinvestment risk in the issuer-versus-investor tug of war