Retractable Bond

When you're a kid and make a trade (say, exchanging your pudding for someone else's baloney sandwich), you might call "no backsies." Once the trade is made, the other person can't change their mind. The deal is done.

A retractable bond has the opposite provision. It's a bond, but with a "backsies" stipulation built in. The holder of the bond can make the issuer redeem it at par. They can sell it back to the issuer, forcing them to pay off whatever remaining principal there is left on the debt instrument.

In technical terms, the security consists of a bond along with a put option. The put option gives the holder the option to sell it back to the issuer. Or they can hold onto it, earning more interest.

The retractable bond allows the holder to take advantage of changing interest rates. If they can get a better deal somewhere else, they can exercise the put, get their money back, and buy another bond with a higher rate.