QUICK DEFINITION
Amortization is the scheduled repayment of principal over the life of a debt instrument instead of one single payment at maturity.
WHY IT MATTERS
Why Amortization matters in bond markets
Amortization changes a bond's cash-flow profile, duration and refinancing risk.
MARKET CONTEXT
How to think about it
Bond investors use amortization as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Amortization important for fixed-income investors?
← Back to the Bond Market Glossary Yes. Amortization changes a bond's cash-flow profile, duration and refinancing risk.