After 1986, an issuer can only realize savings by refunding old "high coupon" bonds with new low coupon" bonds.
Also, the act requires that bonds called in an advance refunding which produces savings be called at the first date on which they can be redeemed at a call premium of 3 percent or less.
Refunding savings are sensitive both to changes in the level of interest rates and to changes in the shape of the yield curve, which depicts the difference between short-term rates and long-term rates.
Generally, the savings in a "high to low" refunding solely result when the issuer "saves" the interest between the call date and the maturity date.
Most refunding analyses present the refunded debt service to maturity (which is used for comparison purposes to illustrate savings), the refunded debt service to call (which is used to illustrate the escrow account requirements), the escrow account investments and the escrow account yield (which is used to illustrate the yield restriction), the sources and uses of funds (which is used to illustrate the refunding issue sizing), and the refunding debt service.