Coupon Treasury bonds and most corporate bonds are non-amortizing securities because they pay only interest until maturity. At maturity these bonds repay the entire par value or face value. A MBS is backed by pools of loans that generally have a schedule of partial principal payments, making these securities amortizing securities. A sinking fund provision is another example of an amortizing feature of a bond. This feature is designed to pay a part or the entire total of the issue by the maturity date. |
