What is the primary factor an issuer considers when deciding which issue to refund?

The primary factor an issuer considers when deciding which issue to refund is the highest coupon. This is because a higher coupon rate indicates that the issuer is paying more in interest on that particular debt compared to other issues. When interest rates in the market decrease, issuers often look to refund or refinance higher-cost debt to take advantage of lower rates, thereby reducing their overall interest expense.

By targeting the debt with the highest coupon, the issuer can significantly decrease its interest payments once they reissue the debt at the new, lower rates. This strategic move not only improves cash flow but also enhances overall financial management.

Other factors, like the earliest call date, lowest call premium, or longest maturity, may also play a role in the decision-making process, but they do not have the same immediate financial impact as prioritizing the debt with the highest coupon. By addressing high-cost debt first, issuers can maximize savings and optimize their debt portfolio.