Posted in Finance, Accounting and Economics Terms, Total Reads: 505
Definition: Callable Bond
These are bonds that are redeemable in nature. That is the issuing company will call back its bonds. It can do so before its maturity period. And if that is the case, it will have to pay a premium for calling the bonds.
Any company issues bonds and incurs a debt primarily to finance its operations. And since it’s a debt, it will have to pay an interest to the bond holders.
If due to the market conditions the interest rates decline, the company will call back its bonds and will reissue them at the lower interest rates. As a result of this, it can save the interest amount it needs to pay.