What does "rolling down the yield curve" denote in refunding?

Rolling down the yield curve refers to a strategy in debt management that involves refinancing or refunding existing debt, taking advantage of the downward slope of the yield curve. When bonds are issued with shorter maturities and then rolled over as they approach their maturity, it effectively allows the issuer to take advantage of the interest rates that are typically lower for shorter maturity bonds compared to longer maturities. This can lead to significant savings as the coupon rates on existing debt may be higher than the rates of newly issued shorter-term debt.

In this context, option B, which reflects savings from shorter maturity debt, aligns accurately with the concept of rolling down the yield curve. By refinancing existing debt with shorter maturity bonds, the issuer can minimize interest expenses and optimize cash flow management, which is a critical aspect of effective debt management practices.

The other options do not capture this concept accurately. Increasing bond issuance for long-term projects does not directly relate to the strategy of rolling down the yield curve, which focuses on leveraging the yield curve's shape. Reducing interest rates on new long-term bonds is somewhat tangential since the strategy is more effective with short-term bonds rather than long-term. Setting higher prices on fixed-rate bonds does not reflect the operational mechanics of rolling down the yield curve