A call date has to deal with the redemption of a callable bond. Essentially, the earliest possible date at which the issuer of the bond may redeem the bond is referred to as the call date. The call date is different from the maturity date on callable bonds, in that way that call date takes place at some point before the stated date of maturity that is specified in the terms and conditions surrounding the bond issue.
Characteristics of the call date
One of the characteristics of the call date is that before the bond issuer is likely to exercise an early redemption certain conditions must be present. First condition is that, call dates may be extended to bond holders only when the interest rates fall. When this has happened then to gather in the bonds, honoring them at the old rate of interest, then immediately issuing new bonds at the new and lower rate of interest becomes in the best interests of the bond issuer.
Actual meaning of honoring a call date
A bondholder may also show his or her interest in accepting a call date that the bond issuer offers to him or her. While what is meant by honoring a call date is that the payoff on the investment will be reduced, it also merely means that there is some interest income that is earned, and that the proceeds can immediately be reinvested in another bond or other type of investment.
Terms and conditions surrounding a bond
Generally, information about the earliest possible call date that the bond issuer can exercise is included in the terms and conditions surrounding a bond. Here you have to keep in mind that just due to the reason that a bond issue comes with specifications related to a call date, it is not necessary that the issuer will exercise the call date at any point in time. There is a probability that the bond will remain in effect and earn interest income all the way through to the maturity date unless there is a sound financial reason for invoking a call date.
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