Definition 1.
Bond with long-term coupons but short maturity, usually a home financing bond. Super sinker bonds are sometimes used when some of the mortgages backing the bond get prepaid, and so the bond is likely to be paid off quite soon. The bond holder is uncertain as to when exactly the pay-off may occur, but the annual return on these bonds works out quite high over the short-to-medium-term holding period.
|