Definition of Z-Bond

Financial Terms Beginning with Z

What is a Z-Bond

A Z-bond is a type of bond that will accrue interest to be added to the principal balance, which becomes payable after satisfaction of all other bond classes. It is created by separating the interest and principal payments of a mortgage-backed security (MBS) into two different securities. The Z-bond, also known as an accretion bond, accrual bond or accrual tranche, is the security that does not receive any periodic interest payments. Instead, the interest payments are accumulated or accrued and added to the principal of the bond, which is paid out at a maturity date.

Higher Risk for Higher Reward

Z-bonds are typically created to provide a way for investors to take on a higher level of risk in exchange for a potentially higher return. Since the interest payments are deferred until maturity, Z-bonds tend to have a higher yield than other tranches of the same mortgage-backed security. However, because the interest is not paid out periodically, Z-bonds are generally considered to be more speculative and riskier than other tranches.

Z-bonds are often used as a way for investors to take on the risk associated with the prepayment of mortgages, which can impact the cash flows of mortgage-backed securities. Since Z-bonds are not subject to prepayment risk, they can provide a more stable return for investors.

GlobEx Markets Financial Dictionary of Terms, Phrases and Concepts

The GlobEx Markets financial dictionary is a reference resource that provides the definitions and explanations of various financial terms, phrases and concepts that are used in international finance and global investing. It includes a broad range of financial terms, such as those related to stocks, bonds, currencies, commodities, options, futures, crypto and much more.

A financial dictionary can be useful for anyone who wants to learn more about finance and investing, or who works in the financial industry. It can help clarify the meaning of technical terms and the language used in financial publications, reports and other sources.

Benefits of the GlobEx Markets Financial Dictionary

There are several benefits to using the GlobEx Markets financial dictionary, including:

  • Clarifying Technical Terminology: The financial world is filled with complex terms and language that can be confusing to those who are not familiar with it. A financial dictionary can help clarify the meaning of technical terms and make them more understandable.
  • Improving Financial Literacy: By learning the meaning of financial terms, phrases and concepts, you can improve your overall financial literacy and gain a better understanding of the workings of the financial world.
  • Enhancing Communication: A financial dictionary can help improve communication among financial professionals by ensuring that everyone is using the same terminology, phrases and concepts.
  • Supporting Research: When conducting financial research or analysis, a financial dictionary can be a valuable resource for identifying and understanding key terms, phrases and concepts.
  • Facilitating Decision-Making: Understanding financial terms, phrases and concepts can help you make better-informed financial decisions, whether you are managing your own finances or making decisions on behalf of an organization.

Overall, the GlobEx Markets financial dictionary can help improve your understanding of international finance and global investing. It is a valuable tool for anyone who works in the financial industry or who wants to improve their financial literacy.

Related Investment Terms


Global Bond

Treasury Bond

View of NYC between the Brooklyn Bridge and Manhattan Bridge
New York, New York