A financial security that cannot be redeemed early by the issuer. The issuer of a noncallable bond subjects itself to interest rate risk because, at issuance, it locks in the interest rate it will pay until the security matures. If interest rates decline, the issuer must continue paying the higher rate until the security matures.
As a result, non-callable bonds tend to pay investors a lower interest rate than callable bonds. However, the risk is lower to the investor, who is assured of receiving the stated interest rate for the duration of the security. Corporate bonds are the most common type of security that carries call provisions.
Bonds are often called when interest rates drop because lower interest rates mean the company can finance its debt at a lower cost. The call feature subjects investors to reinvestment risk.
The opposite of a noncallable security is a callable security. A callable security can be redeemed early and pays a premium to compensate the investor for the risk that he or she will not earn as much compared to holding the security until maturity.
Some callable bonds are noncallable for a set period after they are first issued. This time period is called a protection period.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
noncallable — A preferred stock or bond that cannot be redeemed whenever desired by the issuer. Bloomberg Financial Dictionary * * * noncallable UK US (also non callable) /ˌnɒnˈkɔːləbl/ adjective ► FINANCE used to describe bonds, shares, etc. that cannot be… … Financial and business terms
noncallable — /non kaw leuh beuhl/, adj. 1. not capable of being called. 2. not subject to redemption prior to maturity, as securities. 3. not subject to payment on demand, as money loaned. [NON + CALLABLE] * * * … Universalium
noncallable — adjective Not callable … Wiktionary
noncallable — adj. not redeemable upon demand … English contemporary dictionary
noncallable — non·callable … English syllables
noncallable — non•call′a•ble adj … From formal English to slang
noncallable — (ˈ) ̷ ̷+ adjective : not capable of or susceptible to being called … Useful english dictionary
noncallable debenture — UK US noun [C] ► FINANCE a debenture (= type of loan) that cannot be paid back before the end of an agreed period: »They sold $150 million of 30 year noncallable debentures. → Compare CALLABLE DEBENTURE(Cf. ↑callable debenture) … Financial and business terms
noncallable notes — UK US noun [plural] ► FINANCE borrowed money that cannot be paid back before the end of an agreed period of time: »Time Warner also sold $150 million of 20 year noncallable notes … Financial and business terms
noncallable bond — noun a bond containing a provision that the holder cannot redeem the security before a specific date (usually at maturity) • Hypernyms: ↑bond, ↑bond certificate … Useful english dictionary