Definition of callable bond

Also called redeemable bond. A bond that can be redeemed (called) before maturity by its issuer, normally at a premium to its face value. The fact that all or part of a bond issue is callable is indicated in a call provision (also called call feature) in the bond agreement. This specifies the first call date and the call premium. The period during which a bond is not redeemable is the holder's call protection. The risk an investor takes in buying a callable bond is the call risk.