A specified initial period during which a callable bond may not be called.
This is often one of the conditions under which issuers of a callable bond are allowed to redeem it prior to maturity. The duration of the call protection is typically between two and three years after the bond is issued. This is a provision that benefits investors, assuring at least a minimum amount of time to reap the benefits of the security, regardless of the state of the market. The period during which the bond is protected is commonly known as the "deferment period" or the "cushion."
U.S. Government securities are not generally callable, except for certain 30-year Treasury bonds which become callable after 25 years. Many corporate and municipal issuers provide ten years of call protection. Knowing if a bond agreement includes a call protection is important for investors because without one, or when the deferment period is over, the bond could be called away at any time specified in the indenture.
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