Understanding the redemption feature in bonds is vital for investors. While benefiting issuers by allowing early bond recall, investors should weigh its impact on their strategy. Some bonds counterbalance this effect, aiming for stable returns. GoldenPi articles offer insights on bonds and finance, aiding well-informed investment choices.

1. Does the bond have a
Redemption feature in it?

2. What is Bond Redemption?
• Callable Bonds
• Issuer can call back the bond
before maturity
• Beneficial to the issuer in certain
scenarios
How is it Beneficial to the Issuer?
• Allows the issuer to purchase the bond back
from investors
• Helpful when interest rates in the market are
falling
• Can issue new bonds with lower interest rates

3. Investor Scenarios
a) Scenario 1 - Decreasing Interest Rates
• Investor loses higher interest rates
• Receives principal amount back before maturity
• At a premium to the face value
b) Scenario 2 - Higher Interest Rates
• Issuer will not call the bond
• Investor continues to earn assured interest rate until
maturity
Terms and
Conditions
• Issuer has a lock-in period before calling the bond
• Date and price of redemption are pre-determined

4. Conclusion
• Bond redemption may be less profitable for
investors
• Beneficial for issuers when interest rates fall
• Provides flexibility for issuers to change decisions
• Investors still reap returns with lower interest
rates

5. THANK YOU
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governments-bonds/