callable

Definition

Able to be redeemed prior to maturity. The term usually applies to bonds and convertible securities. The issuer of a callable security has to state the conditions under which the security may be called at the time of issue. For most securities, there is a certain initial time period in which the security cannot be called. A bond will usually be called when market interest rates fall below the yield being paid on the bond (bonds are usually called when the price rises to a certain point). To reflect this risk, a callable security is usually priced lower than a non-callable security.

Use callable in a sentence

The item was callable and that meant we could redeem it by a certain time and everything would be alright.

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The bond matured in twenty years, however it was callable at par (face value) any time after the first five years.

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When an investor feels that interest rates will fall, Callable bonds are a good option for short term investing. If the investor is correct they will earn some return in the short term and then get there money out if interest rates fall.

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