Callable Bond

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DEFINITION of 'Callable Bond'

A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called.

Also known as a "redeemable bond."

INVESTOPEDIA EXPLAINS 'Callable Bond'

The main cause of a call is a decline in interest rates. If interest rates have declined since a company first issued the bonds, it will likely want to refinance this debt at a lower rate of interest. In this case, company will call its current bonds and reissue them at a lower rate of interest.

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