Finance glossary
Callable Bond
Definition
A bond the issuer can redeem early before maturity.
A callable bond gives the issuer the right to repay it before maturity, usually when interest rates fall so they can refinance cheaper. Investors face reinvestment risk and demand higher yields as compensation. The call feature caps the bond price appreciation.
In a sentence
When rates fell, the issuer redeemed the callable bond early and refinanced more cheaply.
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