Molson Hart

If they did buy them back why wouldn’t that be a profitable?

The reason the bonds are lower is because their cost of funds are higher. So, no, the overall gains are economically 0.

If they don’t have to issue new debt or equity, it’s a profitable transaction; I sell a promise to pay $100 for $97. 1 year later market incorrectly values the promise at $50. I buy it back. I’ve made $47. I wouldn’t make this a country’s economic plan, but it is profitable.

You don't get it. Where will you get the funds to buy it back fromm? By borrowing at 20%

I do get it. I’m making a technical point which does not change the general correctness of your statement, but I’m nonetheless still right. Borrow $97, promise to pay $100. Buy back for $50. Keep $47. Provides no need for additional financing, it works.

No, you still don't get it. If you don't need additional financing your bonds would NOT be at 20%.

I do get it and now you’re making me mad. I keep telling you that under the following conditions it is mathematically profitable and you keep ignoring my statement cite different conditions. Markets are volatile and misappraise as you know better than I.

"Under the following conditions", bonds would not be at 20%. You need to try to think before making statements in finance. Study some finance.