Noncallable

Definition of 'Noncallable'


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.

Investopedia explains '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.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  2. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  3. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  4. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  5. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  6. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
Trading Center