Explore commonly used personal finance terms.
An amortizing bond is a bond that repays both interest and a portion of the principal periodically, rather than repaying the entire principal at maturity. Each payment covers both interest and principal, reducing the outstanding balance over time. Amortizing bonds offer predictable cash flows and are commonly found in mortgage-backed securities or certain municipal bonds. Investors in amortizing bonds benefit from reduced credit risk over time, as the principal is repaid incrementally, lowering exposure as the bond approaches maturity.
