The term “first call” makes reference to the beginning of the cash flow cycle for a cash flow window. In addition, when dealing with securities, first call will happen on a first call date, which is stated in an indenture. The first call happens on the first date on which an issuer may redeem a bond, whether they choose to do so partially or completely.
The first call is important for any investor who is holding a security that is selling near or above its call price, which makes the date of first call an important time frame, indeed. The first call date is usually five or ten years after the original date of issue, but this can vary according to the security itself.
Information about first call is usually found on the bond certificates themselves, and can also be received directly from a firm or broker that holds the security. Naturally, bonds that are selling at a premium or “above par” are often quoted at the “yield to first call.”
In an effort to cover the bondholder, most callable bonds – or bonds that can be called before they actually reach the maturity date – will also have one of the aforementioned first call dates. This is important because it allows a guarantee of the current interest rate that will last for a predetermined length of time. For reference purposes, the date of the first call will be included in the bond agreement.