redeemable bond

Definition

A bond which the issuer has the right to redeem prior to its maturity date, under certain conditions. When issued, the bond will explain when it can be redeemed and what the price will be. In most cases, the price will be slightly above the par value for the bond and will increase the earlier the bond is called. A company will often call a bond if it is paying a higher coupon than the current market interest rates. Basically, the company can reissue the same bonds at a lower interest rate, saving them some amount on all the coupon payments; this process is called "refunding." Unfortunately, these are also the same circumstances in which the bonds have the highest price; interest rates have decreased since the bonds were issued, increasing the price. In many cases, the company will have the right to call the bonds at a lower price than the market price. If a bond is called, the bondholder will be notified by mail and have no choice in the matter. The bond will stop paying interest shortly after the bond is called, so there is no reason to hold on to it. Companies also typically advertise in major financial publications to notify bondholders. Generally, redeemable bonds will carry something called call protection. This means that there is some period of time during which the bond cannot be called. also called callable bond. opposite of irredeemable bond or non-callable bond.

Use redeemable bond in a sentence

You should try and invest in a redeemable bond if you think you want a good low risk safe investment.

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The redeemable bond was able to be redeemed prior to the maturity date so we included it in our portfolio for liquidity.

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I was feeling insecure about a long term war bond, so i opted for a redeemable bond instead. the terms aren't as good but i'm happy to be able to get my money out sooner if needed.

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redeemable European callable bond