Hard Call Protection

Hard call protection is a feature of some callable bonds that prevents the issuer from calling the bond for a certain period of time. This protection is designed to give investors some peace of mind that they will not be forced to sell their bonds at a time when they may not be ready to do so.

There are two main types of hard call protection:

* **Absolute hard call protection:** This type of protection prevents the issuer from calling the bond for a specified period of time, regardless of the market price of the bond.
* **Relative hard call protection:** This type of protection prevents the issuer from calling the bond for a specified period of time, unless the market price of the bond exceeds a certain level.

Hard call protection can be an important consideration for investors who are looking for bonds that provide a high level of safety. However, it is important to note that hard call protection does not guarantee that the bond will not be called. In some cases, the issuer may be able to call the bond even if it is protected by hard call protection.

Here are some of the pros and cons of hard call protection:

**Pros:**

* Hard call protection can provide investors with some peace of mind that they will not be forced to sell their bonds at a time when they may not be ready to do so.
* Hard call protection can help to protect investors from the risk of rising interest rates. If interest rates rise, the value of callable bonds will decline. However, if the bond is protected by hard call protection, the issuer will not be able to call the bond and force investors to sell it at a loss.

**Cons:**

* Hard call protection can reduce the yield on a bond. This is because the issuer is essentially paying investors for the protection that the hard call provision provides.
* Hard call protection can make it more difficult for the issuer to refinance the bond. This is because the issuer will have to pay a higher interest rate if it wants to issue a new bond to replace the callable bond.

Ultimately, the decision of whether or not to invest in a bond with hard call protection depends on the individual investor's risk tolerance and investment goals. If an investor is looking for a bond that provides a high level of safety, then hard call protection may be a good option. However, investors should be aware of the potential costs of hard call protection before making an investment decision.