Refunding or pre-refunding is a term used to refinance a bond at a lower interest rate than its original interest rate. In periods of low interest rates, issuers may be paying a higher interest rate than the current market rates on their outstanding issues. In this case, an issuer may sell a new bond issue with a lower coupon rate and use the proceeds to call the original issue. This in turn, leads to favorable interest rate lock up. An issuer can use the proceeds from the second offering for funding an escrow account of U.S. Treasuries; a process called: pre-refunding. The original offering, is thereby pre-refunded because the escrowed account will mature and pay off the original bond offering at the first call date.