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Sinkable bond

Category — Bond Types
A sinkable bond is a bond that is secured by a fund that the issuer creates to pay the principal of the debt according to a stated repayment schedule.

A sinking fund is a pool of funds set aside by a company to pay off previously issued debt before a specified maturity date on a predetermined schedule. The issuer does not reserve all the money at once but replenishes the fund regularly (not as described in the repayment schedule, but more often).

Sinkable bonds can be beneficial for issuers. They are a cheaper way to raise funds, as the issuer lowers the borrowing rate due to the positive impact the sinking fund has on the credit rating. From an investor’s point of view, sinkable bonds are investment vehicles with a low level of risk.

Examples of Sinkable Bonds include the issue of municipalitie Bay Area Toll Authority, 5% 1apr2054, as well as the issue of corporate issuer Albar Mimunit Services, 3.25% 13jan2027.
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