With very few exceptions, lenders expect debt to be paid back by a date certain, the maturity date. The debt issuer -- a governmental entity or corporation -- redeems the debt upon maturity by paying the face value and any remaining interest due. After redemption, the debt has no value and pays no more interest. In some situations, an issuer may redeem debt before maturity.
Redemption Before Maturity
Some bonds contain a feature that allows the issuer to redeem, or call, the debt before maturity. The issuer can exercise the call feature on a set date -- the call date -- for a predetermined price, usually a little more than the face value. A call is mandatory -- investors must submit their bonds for redemption. Investors can also purchase putable bonds, which give them the right to force the issuer to buy back the bonds on the put date for a set price, normally less than the face value.
Buybacks are similar to redemptions, except that they aren't mandatory. In a buyback, the issuer goes into the marketplace and purchases the bonds at current prices. Alternatively, the issuer might announce a tender offer -- a bid to repurchase its bonds at a set price. Investors can choose to ignore buybacks and tender offers. A few bond issues are irredeemable, meaning they have no maturity date. For example, UK consols are perpetual unless Parliament forces redemption.