Series 65: Refunding Of Bonds

Refunding of Bonds

The process of retiring outstanding bonds and issuing new ones is called refunding. Bond refunding may or may not involve an early redemption. Refunding is similar to a homeowner refinancing her mortgage. When interest rates fall, the homeowner refinances to replace her current mortgage with a new mortgage at a lower rate. Similarly, when interest rates fall, a company may issue new bonds, called refunding bonds, at a lower rate. The proceeds of the refunding bonds have the sole