Fixed-Income Cash Flows and Types

How a bond's principal can be repaid (bullet, fully or partially amortizing, sinking fund, waterfall), how its coupon can be set (fixed, floating, step-up, credit-linked, PIK, index-linked, zero and deferred), which embedded options help the issuer or the investor (call, put, conversion, CoCo), and how the place of issue and tax rules change a bond's legal and after-tax profile.

1. 1. Bullet, fully amortizing and partially amortizing bondsA bullet bond pays only interest until it returns all principal at maturity, an amortizing bond returns principal along the way with a level payment, and a partially amortizing bond does a bit of both by leaving a balloon at the end.Video · 5 minFree14 min
2. 2. Sinking funds, waterfalls, zero-coupon and deferred coupon bondsSinking funds retire a bond bit by bit, waterfalls decide which investor class gets principal first, and zero-coupon and deferred coupon bonds push interest toward maturity.13 min
3. 3. Floating, step-up, credit-linked and PIK couponsA coupon need not be fixed: it can reset with a market reference rate, rise on a schedule or after an event, depend on the issuer's credit metrics, or be paid in extra bonds instead of cash.13 min
4. 4. Index-linked and inflation-linked bondsInflation-linked bonds protect real value by adjusting cash flows to a price index: capital-indexed bonds scale the principal (and so the coupon), while interest-indexed bonds adjust only the coupon.11 min
5. 5. Callable and putable bondsA call lets the issuer buy the bond back early, which caps its price and earns investors a higher yield; a put lets the investor sell it back, which floors its price and costs investors some yield.13 min
6. 6. Convertible bonds, warrants and contingent convertiblesA convertible lets the investor swap the bond for a fixed number of shares, so it trades like a bond when the share price is low and like the shares when it is high; a CoCo converts automatically on the downside when a bank's capital runs short.Video · 6 min12 min
7. 7. Domestic, foreign and Eurobonds; tax considerationsWhere a bond is issued and by whom decides whether it is domestic, foreign, a Eurobond or a global bond, which sets its legal and regulatory treatment, while tax rules on interest, capital gains, discounts and premiums shape its after-tax return.13 min