Put Bond Definition

Put Bond Definition


A put bond allows an investor to relinquish their bond at a specified date and price before the bond's maturity date.  A put bond is often times confused with a callable bond.  While a callable bond is called at the discretion of the issuer, a put bond can be called by the investor.   This is better for the investor because it gives the investor the power to relinquish their bond back to the issuer and receive the principal prior to the bond's maturity.  So, in essence the put bond maturity date is the real maturity date.  A put bond investor will call the bond if the bond issuer runs into financial hardships or there is a period of rising interest rates.  Rising interest rates leads to a surge in calls because the bond investor can get a higher return on the interest than the bond.
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