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Callable Bond
A bond the issuer can repay before maturity, at a price set in advance.
Why issuers add a call option
A call option lets the issuer redeem the bond early, usually because it can refinance at a lower rate later, or wants flexibility to restructure its debt. That optionality is valuable to the issuer, which is why callable bonds typically offer a higher coupon than an otherwise identical non-callable bond.
What it means for your return
If a bond gets called, you receive your principal back early and have to reinvest it, often at a lower prevailing rate, since issuers tend to call bonds when rates have fallen. This is why yield to call, not just yield to maturity, matters when you're evaluating a callable bond.
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