The Deferred Call Provision and Corporate Bond Yields*

The purpose of this paper is to estimate empirically the effect of the deferred call provisions on corporate bond yields using the conceptual framework of callable and call-free yields developed by Jen and Wert [3]. After reviewing briefly the above-mentioned study in Section I, Section II presents patterns of callable and call-free yields of deferred issues from January 1956 to June 1961 by grades, months of offering, and coupon rates and contrasts them with those of the freely callable issues. Section III further contrasts yields of deferred issues with those of freely-callable ones on a pair comparison basis, while Section IV discusses the implication of the study for both the issuers and the investors.