callable bond

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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.

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.

References in periodicals archive ?
Inflation-linked bonds, callable bonds, floating rate and local government bonds are excluded from the index.
The agency also gave its BBB rating to the bank's subordinated callable bonds due 27 July 2017 issued in the amount of JPY10bn (USD129m/EUR94m).
However, it should not be used with callable bonds due to its imprecision with this type of issue.
Using data from 1980-2003, we find that callable bonds are often issued by firms with both information asymmetry and underinvestment problems.
As postulated by Taggart and Bodie (1978) and Barnea, Hauge, and Senbet (1980), risk incentive agency costs can be reduced by issuing callable bonds because the call option value (i.
SpareBank One SR-Bank has announced that it will issue new bonds on the Norwegian bond market, envisaging callable bonds in two tranches: one with a variable coupon rate and one with a fixed coupon rate in the non-call period.
International Resource News-1 September 2008-Vantage Drilling Announces Senior Secured Callable Bonds Offering(C)2008 ENPublishing - http://www.
Require complete hedging of all F&F interest rate risk, using matching callable bonds.
For callable bonds, the excess of the purchase price over the call price is amortized through the call date (the earliest price and date are used if there is more than one).
Coordinate the final closing and settlement to have proceeds wired directly into the Town s current operating account and the payment of any outstanding bond anticipation notes or callable bonds.
26 October 2011 -- JCR today assigned its BBB+ rating to JPY7bn (USD92m/EUR66m) subordinated callable bonds, due 2 November 2021, to be issued by Shikoku Bank Ltd (TYO:8387).