How does removing the incentive for many issuers

Reference no: EM131781299

Question: The following excerpt is taken from an article titled "Call Provisions Drop Off" that appeared in the January 27, 1992, issue of bond Week , p. 2:

Issuance of callable long-term bonds dropped off further last year as interest rates fell, removing the incentive for many issuers to pay extra for the provision, said Street capital market officials.

The shift toward nonsalable issues, which began in the late 1980s, reflects the secular trend of investors unwilling to bear prepayment risk and possibly the cyclical trend that corporations believe that interest rates have hit all-time lows.

a. What "incentive" is this article referring to in the first sentence of the excerpt?

b. Why would issuers not be willing to pay for this incentive if they feel that interest rates will continue to decline?

Reference no: EM131781299

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