What does it mean to have a special term on a bond and what are the most common special terms?
A special term is a feature not found on a conventional bond. It is important to understand how this feature may affect your investment. Common special terms include: Callable/Redeemable: refers to a bond that can be redeemed by the issuer prior to its maturity. The bond holder will usually receive a price slightly higher than par if the bond is called plus any accrued interest. Retractable: a feature which allows the bond investor the right to receive the par value or face value of the bond at a point in time before maturity. Canada/doomsday call (“Call D+15” or “D-15”): The issuer has the right to call back the bond at any time prior to maturity at a floating yield – the equivalent Government of Canada (GOC) bond yield plus a premium. The “+ or – 15” refers to the basis points paid or deducted from the GOC bond yield. The investor is paid the higher of the calculated price, or par. Fixed floater bonds (“FF”): These are callable bonds issued by Canadian banks and insurance companies.
