Sunday, June 25th 2017

American Callable Bond

American Callable Bond Meaning:
A type of bond that the issuer can call at any time between issuance and maturity. They usually pay a premium to the bondholder in the event that the issuer decides to call them.

American Callable Bond Example:
An issuer would normally call their American callable bonds in the event of interest rates falling, as this gives them the opportunity to then re-issue new bonds at the lower interest rate. Obviously this means American-style callable bonds carry interest rate risk and uncertainty for the bondholder.
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