The right of an issuing entity to retire a bond or a debt issue at any time prior to maturity without any preconditions or costs (such as call premia). Issuers generally seek this right because of the possibility that the general level of interest rates may fall, at some time in future, below the coupon rate or interest payment rate. If the fall is sufficient, the issuer will redeem the issue and replace it with another issue with a lower coupon rate. That, of course, makes the bondholder or the creditor at a disadvantage, being deprived of a profitable opportunity, just to the benefit of the bond issuer or debtor.
Finance
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