bond sinking fund

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Bond Sinking Fund

A fund or account into which an issuer deposits money on a regular basis in order to repay a bond that will come due in the future. For example, if a company issues a bond with a balloon maturity of seven years, one may put money into a bond sinking fund for seven years in order to be ready to pay off the principal when it comes due. Some bonds have sinking fund provisions, requiring the issuer to put money aside to repay bondholders at maturity. See also: Sinking fund call.

bond sinking fund