Noncallable
Candlefocus EditorNoncallable securities are bonds that are not redeemable prior to the maturity date. As a result, the investor's capital is secured for the duration of the bond’s life and is not subject to the risk of early call. These bonds are also known as nonredeemable bonds, deferred-maturity bonds, or non-amortizing bonds.
Noncallable bonds are often preferred by conservative investors looking for a relatively safe, fixed-income investment which will provide a fixed return over the course of the bond’s life. However, since the issuer of a noncallable bond has limited ability to redeem the bond, they may compensate investors with slightly higher yields than callable bonds, although the difference is not always significant.
Noncallable bonds may still have features such as sinking-fund payments or scheduled amortization payments, allowing investors to receive cash back during the lifetime of the bond. They can also come with guaranteed minimum return rates if held until the maturity date. Since the bonds will not be called prior to their maturity, investors will be able to benefit from these features.
Compared to callable bonds, noncallable bonds are generally considered more stable and lower risk. They also provide investors with a more certain maturity date and certain return of capital. Because of their low credit risk, noncallable bonds can also be easier to sell in the secondary market, although liquidity might occasionally be limited.
In addition to providing more secure returns, noncallable bonds may be attractive to more risk-averse investors looking for more security of principal and regular payments of income. Noncallable bonds are not suitable for investors who need quick liquidity since they cannot be called before the maturity date, but they can still be useful for investors looking for a relatively secure, fixed-income investment.