What Does It Mean When a Bond Gets Called?

Callable or redeemable bonds are bonds that can be redeemed or paid off by the issuer prior to the bonds' maturity date. When an issuer calls its bonds, it pays investors the call price (usually the face value of the bonds) together with accrued interest to date and, at that point, stops making interest payments.

What happens if bond is called?

This term simply means that a sufficient amount of funds, usually in the form of direct U.S. government obligations, to pay the bond's principal and interest through the maturity date is held in escrow. Any existing features for calling in bonds prior to maturity may still apply.

Is a callable bond good?

Callable bonds can be called away by the issuer before the maturity date, making them riskier than noncallable bonds. However, callable bonds compensate investors for their higher risk by offering slightly higher interest rates. ... Callable bonds are a good investment when interest rates remain unchanged.