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 Call

    A provision allowing a bond issuer the opportunity to buy outstanding ...
  4. Sinking Fund

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

    A debt investment in which an investor loans money to an entity ...
  6. Next Generation Fixed Income (NGFI) ...

    A Next Generation Fixed Income (NGFI) manager is a fixed income ...
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. Mutual Funds & ETFs

    Preferred Stock ETFs: Are They Right for You?

    Considering preferred stock ETFs? Here's a look at their pros and cons.
  9. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  10. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center