Explain the step-up and step-down structure used in the Eurobond market
What will be an ideal response?
The coupon rate of certain securities can either increase or "step up" over time or decrease or "step down" over time. The coupon rate change occurs for either the passage of time or a change in the reference interest rate might. A unique structure in the Eurobond market, particularly for large issues of telecom bonds, has been coupon step-up and step-down provisions where the change in the coupon is triggered by a change in the issuer's credit rating. A rating upgrade would result in a lower coupon rate while a rating downgrade would result in a higher coupon rate.
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Indicate whether the statement is true or false