Non-callable

Describing a debt instrument, typically a bond, that cannot be redeemed by the issuer before its maturity date. This feature protects the investor from having their principal returned prematurely, especially when interest rates are falling. It provides a degree of investment certainty. A non-callable bond offers the investor a guaranteed income stream for the duration of the bond's life, unlike callable bonds which can be paid off early at the issuer's discretion.

Non-callable meaning with examples

• The investor preferred the non-callable corporate bond. She wanted the assurance of receiving the fixed interest payments for the full ten years, which made her feel that her investments were safer. This would allow her the financial security of the assured future income.
• During a period of fluctuating interest rates, the pension fund manager opted for non-callable government bonds to shield the fund's investment from premature repayment and potential reinvestment risk with lower yields if rates dropped.
• The company issued a non-callable bond to secure long-term financing. This gave them predictable borrowing costs. This also reassured bondholders that they could rely on the income stream without fear of early redemption.
• Seeking to maximize their income, the retired couple diversified their portfolio by including non-callable municipal bonds to provide steady, tax-exempt interest. This strategy helped the investor avoid needing to reinvest the income.