First call date definition
/What is the First Call Date?
The first call date is the earliest date on which the indenture agreement for a callable bond issuance allows the issuer to redeem all or part of the bond. The price at which the redemption can be made is specified in the indenture agreement; the price is usually set at par or slightly above this figure.
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FAQs
Why do issuers include a first call date?
Issuers include a first call date to retain the option to redeem the bond or preferred stock early, typically to take advantage of lower interest or dividend rates in the future. This flexibility allows them to refinance their obligations at a lower cost. It also provides a strategic tool for managing debt or capital structure efficiently.
What is yield to call and how does it relate to the first call date?
Yield to call is the rate of return an investor earns if a callable bond is redeemed on its first call date. The calculation assumes the bond is held only until that date and incorporates the call price and remaining coupon payments up to the first call date.
