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
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    Read about interest rate swaps and why these transactions are performed by institutional actors in the bond market, not individual ... Read Answer >>
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    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. 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 >>
  5. Do interest rate swaps trade on the open market?

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