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Sinking Fund Bond

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Sinking Fund Bond
A bond with a fund or account into which an issuer deposits money on a regular basis to repay the bond when it matures. 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.
sinking fund bond
A bond issue for which the issuer is required to establish a sinking fund to provide for the orderly retirement of the bonds. Also called sinker.
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Conventional sinking fund bonds typically make annual sinking fund payments, which commence after some grace period: |Mathematical Expression Omitted~ during the grace period; |Mathematical Expression Omitted~, a positive constant, on each sinking fund date, with a balloon payment |Mathematical Expression Omitted~ (with S* possibly equal to S) on the maturity date; and |Mathematical Expression Omitted~ for all other dates.
Indexed sinking fund debentures: valuation and analysis by Finnerty, John D. / Financial Management
Previous work in this area has analyzed these provisions in terms of interest rate risk,(1) default risk,(2) and the "accumulation game," in which investors increase the value of a sinking fund bond issue by increasing the concentration of its ownership.
Sinking fund prepurchases and the designation option by Kalotay, Andrew; Tuckman, Bruce / Financial Management
441 per cent First Mortgage Sinking Fund Bonds, due August 15, 2035.
Newfoundland Power Announces $60 Million Bond Issue by Business Wire
 
 
 
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