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Finance Glossary

Just call us Bond. Amortized bond.

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American Callable Bond


Them silly Americans.... Callin' their bonds any time they want. That's what an American callable bond is - the issuer can call it at any time prior to its coming due. Usually the call provision carries a premium - that is, the caller (the issuer) of the bond pays 103 cents on the dollar to call the bonds... using advanced Shmoop calculus B/C, that's a 3% premium.

Why would an issuer call? Not because they were lonely but rather because they had issued their bond paying 9.5% interest and then their credit status got better, they were upgraded by Moody's from CCC to BBB and the prevailing interest rates went down. If the company could buy back and reissue new debt paying just 7% interest, why wouldn't they?