Glossary of Municipal Securities Terms

REDEMPTION

A process by which the issuer repays to the bondholder of an outstanding security the principal amount thereof (plus, in certain cases, an additional amount representing a redemption premium) and any accrued interest on the security to the date of redemption. Although the term is normally used in connection with the issuer exercising a right under the bond contract to repay the security prior to its scheduled maturity date (often referred to as a “call”), the payment of a bond at maturity is also a redemption. Redemption provisions in the bond contract for a security may provide the issuer the right to retire the debt fully or partially before the scheduled maturity date. See: REDEMPTION PROVISIONS. Compare: TENDER OPTION.

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