Hard call protection

Hard call protection,

Definition of Hard call protection:

  1. The portion of a bond that a company is unable to redeem.

  2. Hard call protection, or absolute call protection, is a provision in a callable bond whereby the issuer cannot exercise the call and redeem the bond before the specified date, usually three to five years from the date of issuance.

  3. Investors who purchase bonds are paid interest (coupon rate) for the duration of the bond's life. When the bond matures, bondholders are repaid the principal value equivalent to the face value of the bond. Interest rates and bond prices have an inverse relationship—when the bond price declines, then yields rise, and vice versa. While bondholders prefer to invest in bonds with higher rates, as this translates into high interest income payments, issuers would rather sell bonds with lower rates to reduce their cost of borrowing.

How to use Hard call protection in a sentence?

  1. Callable bonds with a hard call protection should be valued by using the yield-to-call method.
  2. Hard call protection serves as a sweetener as it guarantees investors will receive the stated return for protected period before the bond is "free" to be called.
  3. Hard call protection, or absolute call protection, is a provision in a callable bond whereby the issuer cannot exercise the call and redeem the bond before the specified date, usually three to five years from the date of issuance.

Meaning of Hard call protection & Hard call protection Definition