Callable Bonds

Callable bonds are a type of debt security that employers or governments issue to raise funds. They give the issuer the right to repay the bond before its scheduled maturity date, usually after a certain period, often when interest rates decline. This means the issuer can "call" or buy back the bonds at a specified price, potentially saving money on interest payments. For investors, callable bonds typically offer higher yields to compensate for this risk of early redemption, which could limit potential gains if interest rates fall and the bond is called early.