Price compression

Price compression

The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price.

Price Compression

The downward pressure on a callable bond's price appreciation during a period of declining interest rates. Declining interest rates normally raise a bond's price because interest rates are usually fixed at issue; buying such a bond will entitle the buyer to a higher interest rate than he/she would otherwise be able to receive when rates are declining. Callable bonds also rise in price, but price compression means that they do not rise as much because of the risk that the issuer will call the bond and simply repay the principal, depriving the bondholder of future interest.
References in periodicals archive ?
Drivers for the updated expectations include increased competition and price compression in the noninvasive prenatal testing (NIPT) market.
These increases result from a variety of factors including increased construction activity, easing of general contractor price compression, and the availability of labor and sub-trades.
Among the world's top 10 languages, English into Russian showed the most price compression over that period.
It's an important development in terms of price compression, infrastructure, ongoing regulation and the cost of moving money.
The decline in revenue growth in the mid-range and high-end sectors was explained by IDC as resulting from a decrease in unit shipments and also continuing price compression of those units.
And I never thought I would avoid sorting, but price compression [among grades] made me change my mind.
Price compression (through such leveraging methods as volume-driven discounts, the RBRVS, and capitation.
Acquirers, ISOs and banks can additionally benefit by increasing merchant satisfaction and retention, reducing operational expenses and alleviating shrinking margins related to transactional price compression.
However continued price compression will lead to a steady decline in revenue growth rates.
Sales price compression, which began in the second half of 2007 for some major markets, will extend into more regions and market as downward pressure continues into 2008.
Insiders blame price compression for the quilt's fall, claiming that quality has gone down as prices have fallen.