A puttable bond is a type of bond that gives the holder the right to force the issuer to redeem a security before its maturity date. In other words, this is a bond with an embedded Put option, the opposite of securities with a Call option, or
callable bonds.
The price and exercise date of the Put option is set in advance. Often, the coupon yield is negotiated until the offer date.
If this option is exercised, then the investor receives the principal value of the bonds, usually at par, but not necessarily.
The advantage of this type of bond for holders is the reduction of reinvestment risks. That is, if the price of an puttable bond rises and the interest rate falls, then the investor can sell his or her bonds and buy securities with higher rates for the same money.
Often, bonds with an embedded Put option have lower yields, which allows the issuer to borrow money and pay lower interest rates.
An example of an puttable bond would be
Santander Leasing, FRN 23jun2022, PLN (I). Bonds with a Put option are much less common than with a Call option, but there are times when both options can be embedded into the paper at once - for example,
Ronson Development, FRN 15apr2025, PLN (W).