A bond repurchase, also called a bond buyback, is the purchase by an issuer of its own outstanding bonds before they mature. The issuer may buy gradually in the open market through dealers, negotiate privately with large holders, or invite all holders to sell through a bond tender. Bonds bought back are normally cancelled, which reduces the debt outstanding. The term should not be confused with a repurchase agreement (repo), which is a short-term secured loan.
Issuers repurchase bonds to use surplus cash, to reduce interest costs, to manage upcoming maturities or to take advantage of bonds trading below face value, in which case the issuer records a gain on debt extinguishment. Unlike a bond redemption, a repurchase is voluntary for holders, who may refuse the price. Governments also run buyback programmes to improve market liquidity. Where new bonds are offered in place of cash, the transaction is a bond exchange.