Callable Bonds Clause Samples
A callable bonds clause gives the issuer the right to redeem the bonds before their scheduled maturity date, typically at specified times and prices. In practice, this means the issuer can choose to pay back the principal to bondholders early, often if interest rates decline or if it becomes advantageous to refinance the debt. This clause primarily serves to provide issuers with financial flexibility, while also introducing reinvestment risk for investors, as their bonds may be redeemed earlier than expected.
Callable Bonds. Callable bonds provide the issuer with the option to redeem them before maturity. This allows the issuer to refinance if interest rates fall and issue new bonds at a low- er, more favorable rate. Issuers generally must pay a slightly higher rate of interest for this privilege. If a security is called prior to maturity, it may affect the yield you receive. Please consult with your Financial Advisor for additional information.
Callable Bonds. A Callable Bond offers the option to the issuer to redeem the Bond before its maturity date. Redemption may be mandatory for the issuer based on the fulfilment of some preconditions included in the initial terms of issue or at the issuer's option and all or part of the issued Bond may be redeemed before its maturity date. Investors, whose Bonds are called, are paid a specified call price. Any (positive) difference between a Bond's call price and nominal value is the call premium. Call provisions expose investors to additional risks and are therefore issued with higher yields than comparable Bonds with no such provisions.