A bond that the issuer can repay before maturity, typically when rates fall.
A callable bond is a bond that the issuer has the right to repay before the maturity date (to "call" it), usually when interest rates fall and refinancing at lower rates is attractive. Callable bonds offer higher yields than non-callable bonds because the call feature benefits the issuer at the investor's expense. If rates fall and the issuer calls the bond, the investor loses the above-market yield; if rates rise, the issuer keeps the profitable bond. Understanding call features is important when buying bonds; callable bonds are less attractive than non-callable bonds at the same price.