accrual bond
- An accrual bond pertains to a category of security (often the final portion of a collateralized mortgage obligation) that does not make any principal or interest payouts until all previous portions are completely paid off. It is sometimes referred to as a Z-bond
- The mortgage bank issued an accrual bond as the last portion of their new collateralized mortgage obligation.
- As an accrual bond investor, he does not receive any payments until all the senior tranches are paid in full.
- Due to their structure, accrual bonds don't make any payouts for interest or principal until complete payout of the initial tranches is achieved.
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