Collateralized Bond Obligation


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Related to Collateralized Bond Obligation: Collateralized Mortgage Obligations

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 ?
TCW LINC III is a collateralized bond obligation (CBO) managed by TCW Investment Management Company (TCW) which closed July 13, 1999.
Colonial CBO is a collateralized bond obligation (CBO) managed by Colonial Management Associates.
This rating action follows the increase in the expected loss rate of the portfolio resulting from the recent downgrade of certain collateralized bond obligations (CBOs) -- ML CBO III 1996-C-1, ML CBO VI 1996-C-2, and ML CBO VII 1997-C-3 -- that are included in the pool.
Alliance has total assets under management of over $200 billion, and has managed 15 collateralized bond obligations totaling over $4 billion.
9 /PRNewswire/ -- Fitch IBCA released its criteria on rating mortgage collateralized bond obligations (mortgage CBOs) on Monday, Oct.
NEW YORK, June 20 /PRNewswire/ -- The Loan Products Group of Fitch Investors Service will host a luncheon conference on June 24 to discuss its criteria for rating collateralized bond obligations (CBOs) and collateralized loan obligations (CLOs).
C-BASS) and serves as investment advisor to C-BASS-sponsored collateralized bond obligations (CBOs) and private investment funds.

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