Callable Bond

A callable bond is a type of bond that gives the issuer the right to call back the bond before its maturity date. This means that the issuer can force the bondholders to sell back their bonds to the issuer at a predetermined price.

Callable bonds are often issued by companies that want to be able to take advantage of lower interest rates in the future. If interest rates fall, the issuer can call back the bonds and issue new bonds at a lower interest rate. This can save the issuer money in interest payments.

Callable bonds are not as attractive to investors as non-callable bonds, because they give the issuer the ability to take away the investor's money before the bond matures. This means that callable bonds typically have lower yields than non-callable bonds.

There are two main types of callable bonds:

* **Regular callable bonds** can be called back at any time before their maturity date.
* **Puttable callable bonds** can only be called back at certain dates, called call dates.

The call price of a callable bond is the price at which the issuer can call back the bond. The call price is typically set at a premium to the bond's face value.

The callable feature of a bond is typically specified in the bond's indenture. The indenture is a legal document that sets out the terms of the bond issue.

Callable bonds can be a good investment for investors who are looking for a high yield. However, investors should be aware of the risk that the issuer may call back the bonds before maturity.