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.
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.
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.