Super Sinker

What’s more fun than a Super Soaker on a hot, sunny day? A super sinker bond, that’s what.

A “super sinker” is a bond with a long-term coupon but a potentially short maturity, and we most often see them associated with mortgages.

For example, let’s say we buy a ten-year super sinker mortgage revenue bond. And now let’s say that one of the borrowers whose mortgage was financed by said bond decides to sell the house they bought. The money from that paid off mortgage goes into a super sinker fund, which means our super sinker bond is likely to reach maturity a lot sooner than ten years from now. Heck, it might be closer to three or four years.

Investors like super sinker bonds because they pay long-term interest rates, but usually mature quickly. They can be a little risky, especially since we’re never sure when the bond will be called, but that’s part of the reason they tend to be less expensive than some other investment options. And that’s part of the reason they can be so much fun, even when it’s not hot and sunny outside.