Sinking fund requirement

Sinking fund requirement
A condition included in some corporate bond indentures that requires the issuer to
retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.
Bill of materials ...

Sinking fund requirement:
A condition sometimes included in corporate bond contracts whereby the issuer is required to withdraw a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

Balloon maturity Any large principal payment due at maturity for a bond or loan with or without a sinking fund requirement. Balloon Payment See: Bullet.

Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

Some sinking fund requirements must be satisfied by redemption of a specific amount of the issue during a specified year. In other cases, the sinking fund requirement can be met through purchases of the issue in the open market.

To satisfy its sinking fund requirements the issuer will buy its bonds on the open market. If the bonds are trading below par, there is automatic price support for such bonds. Therefore, they are apt to trade on a yield-to-average-life basis.

Since the issuer buys its own bonds on the open market because of sinking fund requirements, if the bonds are trading below par, ...

Any principal due at maturity for a bond with a sinking fund requirement.
Personal Finance Headlines
SEARCH: ...

Any large principal payment due at maturity for a bond or loan with or without a sinking fund requirement.
BAN
See: Bank anticipation notes ...

Because the issuer will buy its own bonds on the open market to satisfy its sinking fund requirements if the bonds are trading below Par, there is to that extent automatic price support for such bonds; ...

A term bond is a set of maturities that are sold as a single unit, at a single price and yield. A typical term bond has mandatory sinking fund requirements that are the maturity amounts. A bond issue may be composed of various serial and term bonds.

See also: Sinking Fund, Banks, Expense, Funding, Prepayment