principles of bond pricing
debt refundings: if a govt must retire outstanding debt by repurchasing it in open market and paying a price reflective of current interest rates, there is no benefit to refunding. no economic gain, because premium to retire existing bonds exactly offsets PV of future interest savings. THE PV OF BONDS ISSUED AT PAR IS ALWAYS THE SAME AS THEIR FACE VALUE.
bonds issued with call prices: give issuer opportunity to redeem (call) the bonds at a pre-est price, irrespective fo the current market price. most call provisions don't become effective until a specified number of years.
even if call prov is not yet effective, govt can still lock in savings that would result from a decline in prevailing IRs. can do this via in-substance defeasance: an advance refunding in which borrower economically, although not legally, satisifies its existing obligations.