Series 53: Callable Or Redeemable Bonds

Callable or Redeemable Bonds

When the issuer has the right or obligation to redeem all or a portion of a bond issue, it is known as a callable bond. An optional redemption allows the issuer to redeem the bonds early, at its option, often at a premium. This callable right may only be exercised at specified times, usually after a certain period of years has elapsed. Issuers will generally choose to redeem a callable bond when current interest rates drop below the bond’s coupon rate.