When are refunds most likely to occur regarding issued securities?

Refunds of issued securities are most likely to occur when interest rates are lower than when the securities were originally sold. This situation occurs because issuers can refinance their debt at a lower cost, thus reducing their interest obligations. If interest rates decline after the original issuance, existing securities with higher interest payments become less attractive to investors. To capitalize on the lower rates, issuers may choose to call (or refund) their existing, higher-rate securities and reissue new securities with lower rates, enabling them to save on interest expenses.

The other scenarios present different dynamics. Higher interest rates generally make existing securities less appealing, so issuers are less likely to refinance under those conditions. An increase in demand for securities might lead to higher market prices, but it doesn't trigger a refund scenario directly. Lastly, a default by the issuer can result in significant financial consequences, but it is not a typical trigger for a refund; rather, it complicates the situation and may lead to losses for investors rather than refunding the securities.