What are callable bonds?
Some corporates are issued with a call feature and referred to as “callable bonds.” This call feature varies from issue to issue and indicates that the bond may be redeemed at a preset price, at the discretion of the issuer, usually prior to the stated maturity date of the bond. Zero Coupon Bonds These bonds are issued with no coupon and the issuer pays all interest and principal when the bond matures. Because the entire payment to the bond holder takes place at maturity, holders are more exposed to valuation swings should interest rates change. Consequently, zero coupon bonds are much more volatile than straight bonds. Also they are treated differently from a taxation point of view, so investors should check with their tax consultant for the appropriate use of these bonds. Index linked Bonds Index linked bonds are bonds with their coupon tied to an index (commodity index, inflation rate). This causes the pay-out to generally fluctuate over the life of the bond (index goes up, pay-out
