Sinkable Bond

AAA

DEFINITION of 'Sinkable Bond'

A bond issue that is backed by a fund, called a sinking fund, that sets aside money on a regular basis to ensure investors that principal and interest payments will be made as promised. Sinkable bonds reduce the risk for investors and therefore enable the issuer to pay a lower interest rate on the sinkable bond being issued. Companies are required to disclose to investors their sinkable bond obligations through their corporate financial statements and prospectus.

INVESTOPEDIA EXPLAINS 'Sinkable Bond'

A sinkable bond issuer is required to buy a certain amount of the bond back from the purchaser at various points throughout the life of the bond, at a set sinking price. Issuers set aside money in their sinking fund to repay the money owed based on the bond's par value. If interest rates fall below the nominal rate of the bond, sinking fund provisions can allow the company to repay all or part of the amount owed, and refinance the remaining balance to the lower rate.

RELATED TERMS
  1. Flat Bond

    A debt instrument that is sold or traded without accrued interest, ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Sinking Fund

    A means of repaying funds that were borrowed through a bond issue. ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Default Risk

    The event in which companies or individuals will be unable to ...
  6. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
Related Articles
  1. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  2. Bonds & Fixed Income

    3 Bonds You May Have Never Heard Of

    These lesser-known bonds may give your portfolio a boost when other investments products fall short.
  3. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  4. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  5. Mutual Funds & ETFs

    Bond Funds Boost Income, Reduce Risk

    These funds can provide stable returns for those who depend on their investment income.
  6. Home & Auto

    The Bear On Bonds

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  7. Investing

    Reassessing Your Approach To Bond Investing

    Rethinking your fixed-income portfolio may not resonate in quite the same way as dropping 10 pounds or finally giving up that smoking habit.
  8. Bonds & Fixed Income

    How Diaspora Bonds Work

    Developing and emerging nations with sizable populations living overseas are using diaspora bonds to raise financing from emigrants.
  9. Bonds & Fixed Income

    How are treasury bill interest rates determined?

    Find out why interest rates for U.S. Treasury bills are determined at auction and how so-called "competitive" bidders impact returns on these debt securities.
  10. Bonds & Fixed Income

    How do treasury bill prices affect other investments?

    Find out how the price and yield of Treasury bills can impact the level of risk investors are willing to accept in their securities.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center