Definition of 'Sinking Fund'
Some municipal and corporate bonds are issued with a sinking fund provision.
The issuer does not need to be the company that buys back the tranches in a sinking fund. Another company can be tasked with this.
One of the main advantages for issuer an optional sinking fund bond is that a corporation can take advantage of lower interest rates if interest rates fall and hold onto the bond if interest rates climb.
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