Refunding bond issuances can generally be characterized as which two types?

Refunding bond issuances are typically categorized into current refunding and advance refunding. Current refunding refers to the practice of issuing new bonds to pay off existing bonds that are maturing within 90 days. Essentially, this type of refunding allows issuers to take advantage of lower interest rates or improve terms by refinancing at a more favorable rate right before the original bonds mature.

Advance refunding, on the other hand, involves issuing new bonds to retire existing bonds that are not maturing within the 90-day timeframe. This allows issuers to lock in lower rates well in advance of the maturity of the old bonds. In this scenario, the proceeds from the new bond sale are placed in an escrow account and are used to pay the original bonds at a later date.

This distinction in refunding types is vital for understanding the timing and financial implications of issuing new debt to manage existing obligations, and it emphasizes strategic decision-making in bond management. The other options do not represent established categories of refunding bonds; for instance, while short-term and long-term refunding might pertain to the duration of debt instruments, they do not specifically relate to the mechanics of how refunding is executed. Similarly, market rate and fixed-rate refunding focus more on