Canada's largest phone company, BCE Inc., is exploring its options regarding bond refunding. The company's Chief Financial Officer indicated that the current interest rate environment made it attractive to consider issuing new debt to retire existing higher-cost debt. The CFO specifically stated that interest rates appear to be moving higher and that now would be the opportune time to refinance.

BCE retired over $2 billion in debt last year but has seen remaining outstanding bonds increase in price and yields fall to where some yields are only 83 basis points above government debt. At the time of issuance that same debt was 230 basis points higher than Canadian government debt. Currently the Canadian government is selling five-year debt for an average yield of about 3.25 percent. However, overall interest rates have been moving higher with Canada's fifth largest lender raising five-year mortgage rates by 25 basis points to 6.1 percent.

There is a(n) ________relationship between the value of outstanding bonds and interest rates

A.

direct

B.

inverse

C.

positive

D.

no relationship exists