Asia Bond Headwinds Rise

The video tutorial explores why issuers decide to call or not call bonds, focusing on cost and market conditions. It discusses perpetual bonds, issuer analysis, and valuation changes due to rising rates and credit spreads. The tutorial includes case studies and examines regional market stress, particularly in Asia. It also highlights the impact of regulations on bond calling decisions, emphasizing the importance of understanding market trends and regulatory requirements.

Why might issuers choose to call perpetual bonds?

• To increase their credit rating

• To reduce costs in a rising rate environment

• To comply with regulatory requirements

• To avoid paying dividends

What determines whether an issuer will call a bond with a reset call?

• The bond's maturity date

• The issuer's reputation

• The bondholder's voting rights

• The step-up in spreads and refixing terms

How do rising interest rates affect the decision to call bonds?

• They decrease the cost of refinancing

• They have no impact on bond calls

• They increase the likelihood of calling bonds

• They make it cheaper to issue new bonds

What is a unique feature of the bond issued by the new developer mentioned?

• It offers voting rights to bondholders

• It has a fixed maturity date

• It punishes the issuer for not calling

• Its coupon stays constant indefinitely

What is a significant factor affecting the banking sector in Korea?

• Stable interest rates

• Domestic credit crunch

• High inflation rates

• Increased foreign investment

How are banks in Asia responding to regulatory pressures regarding bond calls?

• By increasing bond issuance

• By calling back more bonds

• By avoiding calling back bonds if refinancing is costly

• By reducing interest rates

What assumption do some Asian bondholders still hold?

• That bonds will always be called for reputational reasons

• That interest rates will decrease

• That bonds have fixed maturity dates

• That issuers will always refinance