If a bond offering is issued with a put provision, who benefits the most?

A bond with a put provision allows investors to sell the bond back to the issuer at a predetermined price, typically at par value, before maturity. This feature is particularly beneficial to investors who are concerned about interest rate fluctuations or creditworthiness of the issuer. If interest rates rise, the value of existing bonds usually falls; hence, investors can exercise the put option to sell the bond back, avoiding losses and potentially reinvesting in new bonds that offer higher yields.

In contrast, investors who prefer a stable income stream until maturity may not find the put provision as critical, as they are committed to holding onto the bond for the duration. Issuers also benefit from not having to deal with the uncertainties of repurchase unless called by investors, but their primary interest lies in issuing bonds on favorable terms rather than the flexibility provided to investors.

Therefore, the provision primarily serves the needs of investors, specifically those who do not want to hold a bond until maturity, as it gives them opportunities to mitigate risks associated with bond investments.