Series 79: A.6.1.2. Callable Bonds

A.6.1.2. Callable Bonds

A callable bond is a bond that gives the issuer the right to redeem, or call, the bond before maturity. An issuer will consider calling its bonds if interest rates drop to a level that allows it to issue new bonds with a lower coupon, thus reducing its financing costs. The process of retiring outstanding bonds and issuing new bonds is called refunding.

The bond indenture specifies whether the bond has a call feature. Callable bonds usually have call protection for some period of time from the date of issue, meaning the issuer cannot call the bond before a date specified in the