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About Bond Step-Ups

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STEP-UP AND PAY UP
"Something odd is afoot in corporate bond markets," the Financial Times reports. "On the one hand, spreads over government debt are at their narrowest since November 2007, according to Bank of America Merrill Lynch. On the other, new debt is being issued with increasing amounts of protection against downgrades."

So-called "step-up clauses" are back in vogues. According to the FT. Step-ups "typically requiring a company to pay 25 basis points more in interest, if its credit rating slips below investment grade." Sales of debt with step-up clauses attached grew to $37bn in March, according to Bloomberg data, a record-high of 12% of all bonds issued.
SOURCE:   Financial Times

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