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.

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