Redeemable Bond(redirected from Redeemable Bonds)
A bond that the issuer may buy back from investors before maturity. The bond may be called at the discretion of the issuer, within certain limits. When the bond is called, the bondholder receives the par value (or sometimes slightly more) and does not receive any more coupons. Redeemable bonds are issued to allow the issuers to hedge against interest rate risk. That is, if interest rates fall significantly, they can call the bond and issue a new bond at a lower interest rate, reducing their liabilities. However, to protect the bondholder, most redeemable bonds also include call protection, which prevents the bonds from being called for a certain period of time and thereby guarantees the current interest rate for that time. A redeemable bond is also called a callable bond.