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 ?
JWS CBO is a collateralized bond obligation (CBO) managed by Stonegate Capital Management, L.
Brant Point is a collateralized bond obligation (CBO) that closed on May 28, 1999 and is managed by Sankaty Advisors.
Employees of C-BASS previously involved with its CBO business are currently employees of CIM and will conduct the C-BASS collateralized bond obligation (CBO) business in the same manner as C-BASS previously conducted it.
Trainer Wortham III is a collateralized bond obligation (CBO) that closed on Feb.
Korea Credit Guarantee Fund (KODIT) will help issue Primary Collateralized Bond Obligations (P-CBO), amounting to 1 trillion won, for construction companies that pledged unsold homes as collateral for their bonds.

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