Z bond

(redirected from Z-Bonds)

Z bond

A bond on which interest accrues but is not currently paid to the investor but rather is added to the principal balance of the Z bond and becoming payable upon satisfaction of all prior bond classes.

Z Bond

A bond on which interest accrues but is not paid to the bondholder until maturity. That is, the interest is added back into the principal and further interest is calculated over the new, larger principal. A Z bond is also called an accrual bond. See also: Accretion, Balloon Mortgage.
References in periodicals archive ?
And the market has adopted even more complicated Z-bonds, such as the toggle Z.
The Z-bond acts as a stabilizing influence on the other tranches.
However, beginning in 1991, the fund increasingly invested in interest rate-sensitive mortgage-backed derivatives, including "interest only" securities (IOs), inverse IOs, "principal only" securities (POs), "inverse floaters," and accrual or Z-bonds.