Puttable bonds are a type of fixed-income security that grants the bondholder the right to force the issuer to repurchase the bond at specific dates before its maturity. This feature provides investors with a safety net, allowing them to exit the investment if interest rates rise or if the issuer's creditworthiness deteriorates, making alternative investments more attractive.

A puttable bond typically pays a fixed interest rate, similar to regular bonds, but includes the put option that can be exercised at predetermined intervals. If exercised, the issuer must buy back the bond at its face value or a slight premium. This embedded option adds value for investors, who benefit from the flexibility to respond to changing market conditions.

For issuers, puttable bonds can be advantageous because they generally come with lower interest rates compared to non-puttable bonds, as the put option adds security for investors. However, issuers must be prepared for the possibility of having to redeem the bonds before maturity, which can affect their cash flow and financial planning.

Puttable bonds are particularly appealing in volatile or rising interest rate environments, as they provide a measure of protection against interest rate risk. Investors can mitigate potential losses by putting the bond back to the issuer and reinvesting the proceeds in higher-yielding securities.