Sinker

AAA

DEFINITION of 'Sinker'

A bond with payments that are provided by the issuer's sinking fund. A sinker's bond payments are paid from a pool of money that the issuer has set aside to repurchase a portion of the bonds it has issued each year. By repurchasing some bonds before they mature, the company avoids the large expense of repaying the bonds' entire principal at once, when the bonds reach their original maturity date.

INVESTOPEDIA EXPLAINS 'Sinker'

A sinker theoretically has a lower default risk at maturity, since the issuer intends to retire early a portion of the bonds it has issued. However, it also has reinvestment risks similar to those of a callable bond because, if interest rates decline, the investor could have the bond repurchased by the issuer at either the sinking fund price or the current market price.

RELATED TERMS
  1. Super Sinker

    A bond with long-term coupons but a potentially short maturity. ...
  2. Sinking Fund Method

    A technique for depreciating an asset in bookkeeping records ...
  3. Sinking Fund

    A means of repaying funds that were borrowed through a bond issue. ...
  4. Sinking Fund Call

    A provision allowing a bond issuer the opportunity to buy outstanding ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Surrender Period

    The amount of time an investor must wait until he or she can ...
Related Articles
  1. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  2. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  3. Investing

    The Advantages Of Bonds

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

    Savings Bonds For Income And Safety

    Bonds offer undeniable benefits to investors, including safety and tax advantages.
  5. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  6. Bonds & Fixed Income

    Boost Bond Returns With Laddering

    If you want a diversified portfolio and steady cash flow, check out this fixed-income strategy.
  7. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  8. Investing

    What's a T Bond?

    Treasury bonds, or T-bonds, are marketable securities issued by the US government, and are available in increments of $100. Bonds have a maturity range of ten to 30 years, with 30 being the most ...
  9. Investing

    Will 2015 Finally Be The Year For Rising Rates?

    Interest rates continued declining in 2014, but as we enter 2015 many investors are asking the same question: Will 2015 be the year for rising rates?
  10. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

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

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

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center