Debt For Bond Swap

DEFINITION of 'Debt For Bond Swap'

A debt swap involving the exchange of a new bond issue for similar outstanding debt or vice versa. Debt for bond swap transactions are usually executed to take advantage of an interest rate change and/or for tax write-off purposes.

BREAKING DOWN 'Debt For Bond Swap'

When interest rates go up a company may decide that it is to their advantage to issue new bonds at a lower face value in order to retire current debt that carries a higher face value; the company can then take the loss as a tax deduction.

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RELATED FAQS
  1. Can bond traders trade on interest rate swaps?

    Read about interest rate swaps and why these transactions are performed by institutional actors in the bond market, not individual ... Read Answer >>
  2. How do companies benefit from interest rate and currency swaps?

    An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >>
  3. How can a company hedge with currency swaps?

    Read a brief overview of how currency swap exchanges function, why a swap bank is necessary, and how the parties involved ... Read Answer >>
  4. Do interest rate swaps trade on the open market?

    Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >>
  5. Can individual investors profit from interest rate swaps?

    Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >>
  6. What are the benefits of engaging in a currency swap?

    Read about the benefits of engaging in a currency swap, such as when companies in different countries want to borrow funds ... Read Answer >>
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