Definition of Advance Refunding

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Advance Refunding -- For government securities, it is swapping of securities before their due date for government with issues that mature at a more distant date. Advance refunding that prolongs the national debt is the means by which economic disorders resulting from once-for-all elimination of national debt are avoided. For municipal bonds , it is the advance issue of new bonds normally some years before the first maturing date of the old bonds that are to be refunded. The refunding issue usually carries a lower rate than the old bonds, enabling investment of the takings in government securities till the time when the higher-rate issue is subject to redemption. This is called prerefunding and it has been constrained by a number of tax acts.



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Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".


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