Callable

Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. Bonds are usually called when interest rates fall so significantly that the issuer can save money by issuing new bonds at lower rates.

Callability

A provision in an indenture that allows a bond to be redeemed before maturity. Callability allows the bond to 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. Callable 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 callable 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.

Callable

A bond issue, all or part of which may be redeemed before maturity by the issuing corporation under specific conditions. The term also applies to preferred shares of stock, which may be redeemed by the issuing corporation.

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References in periodicals archive

Helwege, 1994, "Alternative Tests of Agency Theories of Callable Corporate Bonds," Financial Management 23, 3-20.

Callable bonds revisited

This particular agency cost can be reduced by callable bonds.

Effects of call provisions and sale and leaseback restrictions on agency costs of debt

Callable Three Swap Debt Period Months Gain Gain Change Ended (Loss) (Loss) Ratio 3/31/2008 670 (750) 89% 6/30/2008 750 (810) 93% 9/30/2008 400 (570) 70% Because the change ratio was less than 80% for the quarter ended September 30, 2008, Company X's swap would cease to qualify for hedge accounting.

How the fair value option will simplify accounting for some hedging transactions

In such a world with no inflation (and no accompanying inflation uncertainty), the option-adjusted NPV rule--inequality (2)--provides an unambiguous link between business fixed investment and the ratio of a long-term callable default-free rate to a duration-matched non-callable default-free rate.

Monetary policy actions and the incentive to invest: the "value of waiting" may overwhelm low interest rates

Callable CDs are long-term, can be redeemed or "called" by the issuing company and the principal value fluctuates, unlike ordinary CDs.

A.G. Edwards Sued Over Callable CDs

Perhaps the best way to understand the impact of including a call option on a municipal bond is to look at the value of a callable bond as if it were the value of a noncallable bond minus the value of the embedded call.

Analysis of the Call Feature on Municipal Debt

Also, except for certain long bonds, Treasury securities are not callable.

The all-weather bond portfolio

The issue is expected to be callable after five years, at which point there would be a 100bp coupon step-up feature.

Fitch Ratings assigns Asahi Mutual Life Insurance Company's bonds 'BB(EXP)'

Clean energy company Orsted A/S (CPH:ORSTED) on Thursday gave irrevocable notice to the holders of its EUR500,000,000 callable subordinated capital securities due 3013 (the capital securities) of the redemption of all of the outstanding aggregate principal amount of the capital securities pursuant to condition 6(B) of the capital securities.

Arsted notifies holders of redemption of its EUR500m callable subordinated capital securities due 3013

(NYSE: AIG) has said that it will redeem all of its outstanding 4.90 percent callable notes due September 25, 2045 on September 25, 2017.

American International to redeem callable notes

22 August 2014 -- The World Bank said it has priced a USD 12.057m World Bank step-up callable green bond sold to Merrill Lynch Wealth Management clients.

World Bank prices USD 12.057m a 10-year step-up callable "green bond"

The company has set initial price thoughts of low- to mid-seven per cent for the perpetual note, which will be callable after five years.

MAF opens books on hybrid bond issue