Short answer: A callable bond lets the issuer repay it before maturity, at a set price (usually 100) on a call date. For you, a call means the income stops earlier than the maturity date suggests and the money has to be reinvested. 165 of the 360 AUD bonds on Candour Capital's range are callable, most of them bank Tier 2.
| Ranking | Callable bonds |
|---|---|
| Tier 2 | 110 |
| Senior unsecured | 28 |
| Subordinated | 8 |
| Additional Tier 1 (AT1) | 8 |
| Senior secured | 7 |
| Senior non-preferred | 4 |
Issuers call when they can borrow more cheaply, for example after rates or their credit spreads fall. Bank Tier 2 and AT1 are normally called at the first call date, but each call needs APRA's approval and is not guaranteed. 68 bonds on our range pay a fixed coupon until the first call date and a floating rate (BBSW plus a margin) after it if not called.
A bond with a 5.50% coupon bought at 101, callable in 3 years and maturing in 8, yields about 5.14% to the call date and 5.34% to maturity. When the price is above 100, the yield to call is lower: use it as the conservative figure. When the price is below 100, the yield to maturity is the lower one.
The first call date, the call price, what the coupon becomes if not called, and both yields. Each bond's call dates are in its terms and on our topic pages.
General information only. It does not take into account your objectives, financial situation or needs and is not a recommendation. Investment opportunities through Candour Capital are for wholesale and professional investors only. Read the offer documents and seek professional advice before investing.