Noncallable

What does 'Noncallable' mean

A financial security that cannot be redeemed early by the issuer. The issuer of a noncallable bond subjects itself to interest rate risk because, at issuance, it locks in the interest rate it will pay until the security matures. If interest rates decline, the issuer must continue paying the higher rate until the security matures.


As a result, non-callable bonds tend to pay investors a lower interest rate than callable bonds. However, the risk is lower to the investor, who is assured of receiving the stated interest rate for the duration of the security. Corporate bonds are the most common type of security that carries call provisions.

BREAKING DOWN 'Noncallable'

Bonds are often called when interest rates drop because lower interest rates mean the company can finance its debt at a lower cost. The call feature subjects investors to reinvestment risk.


The opposite of a noncallable security is a callable security. A callable security can be redeemed early and pays a premium to compensate the investor for the risk that he or she will not earn as much compared to holding the security until maturity.


Some callable bonds are noncallable for a set period after they are first issued. This time period is called a protection period.

RELATED TERMS
  1. Conditional Call Option

    A provision that requires the issuer of a callable bond to replace ...
  2. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer ...
  3. Callable Security

    A security with an embedded call provision that allows the issuer ...
  4. Call Provision

    A provision on a bond or other fixed-income instrument that allows ...
  5. Provisional Call Feature

    A feature of a convertible issue that allows the issuer to call ...
  6. Hard Call Protection

    The period in the life of a callable bond during which the issuing ...
Related Articles
  1. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Bonds

    What they are: Debt securities in which you lend money to an issuer (such as a corporation or government) in exchange for interest payments and the future repayment of the bond’s face value. ...
  2. Markets

    Advanced Bond Concepts: Bond Type Specifics

    Before getting to the all-important subject of bond pricing, we must first understand the many different characteristics bonds can have. When it comes down to it, a bond is simply a contract ...
  3. Managing Wealth

    Six Biggest Bond Risks

    Don't assume that you can't lose money in this market - you can. Find out how.
  4. Managing Wealth

    Retail Notes: A Simpler Alternative To Bond Funds

    These securities are meant to be held until maturity, removing the burden of complex pricing that sometimes plagues bonds.
  5. Markets

    Callable Bond

    Find out how callable bonds are different from regular bonds and what benefits they have for investors.
  6. ETFs & Mutual Funds

    Bonds

    What bonds are: Debt securities where you lend money to an issuer (e.g., a corporation or government) in exchange for interest payments and the future repayment of the bond’s face value. ...
  7. ETFs & Mutual Funds

    Key Strategies To Avoid Negative Bond Returns

    It is difficult to make money in bonds in a rising rate environment, but there are ways to avoid losses.
  8. Markets

    What's a Debt Security?

    A debt security is a financial instrument issued by a company (usually a publicly traded corporation) and sold to an investor.
  9. Trading

    Callable CDs: Check The Fine Print

    These offer higher returns than regular certificates of deposit, but there's a catch.
  10. Managing Wealth

    5 Basic Things To Know About Bonds

    Learn these basic terms to breakdown this seemingly complex investment area.
RELATED FAQS
  1. What risk factors should investors consider before purchasing a callable bond?

    Understand the difference between callable and non-callable bonds and consider all the various risk factors associated with ... Read Answer >>
  2. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ... Read Answer >>
  3. Why do companies issue callable bonds?

    Learn how callable bonds work, how they include an embedded call option, and understand the additional risks that callable ... Read Answer >>
  4. What are the accounting entries when a company issues a callable bond?

    Learn how callable bonds are treated on balance sheets, and understand why callable bonds often pay investors a premium for ... Read Answer >>
  5. How does the current interest rate risk affect bondholders in the US?

  6. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center