Collateralized Bond Obligation

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Collateralized Bond Obligation (CBO)

Investment-grade bonds backed by a collection of junk bonds with different levels of risk, called tiers, that are determined by the quality of junk bond involved. CBOs backed by highly risky junk bonds receive higher interest rates than other CBOs.

Collateralized Bond Obligation

An asset-backed security backed by the receivables on junk bonds. Issuers of CBOs package and sell their receivables on bonds they hold to investors in order to reduce the risk coming from defaults. Returns on CBOs are lower risk than the individual bonds backing them. This is because it is unlikely that all or even most of the junk bonds will default. This makes the collateralized bond obligation investment grade and therefore banks are allowed to invest in them. See also: Collateralized Loan Obligation, Collateralized Mortgage Obligation.

collateralized bond obligation

A derivative security collateralized by a pool of high-yield bonds. Several classes of these obligations are issued for a single pool of bonds with different classes offering different yields and a different degree of credit risk. Interest and principal repayments received on the bond portfolio are passed through to owners of the derivative securities. Compare collateralized mortgage obligation.
References in periodicals archive ?
The CBOS said that "The Sudanese banks have a diverse network of correspondents in the Arab region, Europe and Asia helping to facilitate the movement of transfers and foreign trade.
It is worth mentioning that the symposium comes within the context of the activities, programmes and seminars of the CBOS Department of Strategic Planning and Communication which aims at instillation of strategic planning at the banks besides promotion of the culture of quality and excellence.
The former CBOS governor stressed importance of reforming the revenue sources and cancellation of income tax and customs exemptions or at least their rationalization and control .
CBOS allowed circulation of the mutilated currency as before the issuance of the said brochures without any deduction of its value when it is replaced.