A callable bond which is subject to a call-protection period. A deferred callable bond can be recalled (repurchased) by the issuer, but only after the call-protection period (cushion) ends (for example, one, two, or ten years after the date of purchase). A bond with a deferred call provision offers more protection to investors than a standard callable bond but less than a noncallable bond. It provides holders with relatively more certainty than otherwise comparable bonds.

Typically, borrowers offer a call premium (a sweetener) which is often equal to one year’s coupon, if and when the bond is called before the end of the call-protection period. In this case, the holder will be paid the par value in addition to one year’s coupon.