What is a defining feature of a putable bond?

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A putable bond is characterized by the bondholder's right to sell the bond back to the issuer at predetermined intervals before its maturity date. This feature provides flexibility and protection to the bondholder, allowing them to mitigate risks associated with interest rate fluctuations or the creditworthiness of the issuer. If interest rates rise significantly after the bond is purchased, the bondholder may choose to "put" the bond back to the issuer, often to reinvest in higher-yielding securities. This capability to reclaim the investment on specific dates makes putable bonds distinct from standard bonds, where such options are not available.

In contrast, bonds that can be converted into stock or those that have callable features relate more to the issuer's rights or alternative conversion, while the fixed interest rate describes a common bond characteristic, not specific to putable bonds. The critical aspect of the put policy is its nature as a tool for bondholders to manage their investment and respond proactively to market changes.

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