What are new bonds issued to refinance existing debt called?

New bonds issued specifically to refinance existing debt are known as refunding bonds. This type of bond is utilized when a municipality or corporation seeks to take advantage of lower interest rates or more favorable terms to reduce its overall debt burden. The process typically involves issuing new debt to pay off the older, higher-interest obligations.

Refunding bonds can often result in significant savings on interest payments and improve cash flow for the issuer. This strategic financial maneuver helps manage and restructure debt more efficiently, allowing for better financial planning and stability.

In contrast, corporate bonds are debt securities issued by corporations to raise capital; equity bonds are related to ownership stakes in a company, and zero-coupon bonds do not make periodic interest payments but are issued at a discount to their face value. These options do not pertain specifically to refinancing existing debt, which is why refunding bonds is the appropriate term.