Callable Bond

A bond that may 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 a bit 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, the issuer can call the bond and issue a new bond at a lower interest rate, reducing its 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 bond

A bond that is subject to redemption by its issuer before maturity.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Callable bond.

A callable bond can be redeemed by the issuer before it matures if that provision is included in the terms of the bond agreement, or deed of trust.

Bonds are typically called when interest rates fall, since issuers can save money by paying off existing debt and offering new bonds at lower rates. If a bond is called, the issuer may pay the bondholder a premium, or an amount above the par value of the bond.

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References in periodicals archive

The second tranche consists of EGP 353m, 36-month callable bond with a variable yield of 90 bps over the net after tax return on 182-day Egyptian T-Bills.

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Property company Victoria Park AB (STO:VICPA) on Monday announced that it is sending notice to all bondholders on 20 May 2019, under the terms and conditions of the company's outstanding senior unsecured callable bond loan, to exercise its right to redeem in full all bonds on 17 June 2019.

Victoria Park notifies bondholders of voluntary total redemption of outstanding senior unsecured bond loan

He said that ORPIC took out its deposit for the contract which was set aside as a form of callable bond.

Samsung Engg files complaint against Oman\ s Orpic

The gas is used for power generation and that's of course a key component to keeping the lights on in Erbil and other cities in the Kurdistan region." - Convertible bonds The callable bond's surging yield means that the security, which is relatively illiquid, is receiving "weak" bids, Deepti S.M.

Dana Gas yield at record amid risky Iraq fields

If they had issued a callable bond, the market would have demanded a higher initial interest rate.

Running numbers

In a world without inflation, default-free callable bond yields would be readily available from GNMA ("Ginnie Mae") pass-through mortgage-backed securities (MBS).

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

The chart at the lower left takes a common callable bond, the 30-year Government National Mortgage Association bond, and subtracts, as an estimate of inflation, the yield difference between a 10-year Treasury bond and a 10-year TIIS.

Money and financial markets

The following section will discuss how the value (and yield) of a callable bond differs from a noncallable bond.

Analysis of the Call Feature on Municipal Debt

A callable bond permits an issuer to retire its debt prior to maturity.

Corporate borrowing choices in the '90s