Extendable Bond


DEFINITION of 'Extendable Bond'

A long-term debt security that includes an option to lengthen its maturity period. Depending on the specific terms of the extendable bond, the bond holder and/or bond issuer may have one or more opportunities to defer the repayment of the bond's principal, during which time interest payments continue to be paid. Additionally, the bond holder or issuer may have the option to exchange the bond for one with a longer maturity, at an equal or higher rate of interest. Because these bonds contain an option to extend the maturity period, a feature that adds value to the bond, extendable bonds sell at a higher price than non-extendable bonds.

Also referred to as an extendable note.

BREAKING DOWN 'Extendable Bond'

Investors purchase extendable bonds in order to take advantage of changing interest rates without assuming the risk involved with a long-term bond. An extendable bond is the opposite of a retractable bond. A retractable bond includes an option to redeem the bond earlier than its original maturity period. Both extendable and retractable bonds are intended to provide investors with the flexibility to respond to changing economic conditions, and to take advantage of movements in interest rates.

  1. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Debt Security

    Any debt instrument that can be bought or sold between two parties ...
  4. Issuer

    A legal entity that develops, registers and sells securities ...
  5. Debt Fund

    An investment pool, such as a mutual fund or exchange-traded ...
  6. Retractable Bond

    A bond that features an option for the holder to force the issuer ...
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