Z-Tranche
A special type of bond class in a sequential pay collateralized mortgage obligation. This class of bond does not receive any interest or principal payments until all other tranches have been completely paid off. In a Z-tranche, the interest that is not paid is accrued and added to the principal for future interest calculation purposes.

Investopedia Says:
The main purpose of the Z-tranche is to speed up the maturity of the senior tranches by disbursing payment that the Z-tranche was suppose to receive to the higher priority tranches. Investors that possess long-term liabilities or those who worry about reinvestment risk would benefit from investing in a Z-tranche bond.

Related Terms:
Accrual Bond
Accrued Interest
Collateralized Mortgage Obligation - CMO
Liability
Mortgage
Mortgage Backed Securities - MBS
Reinvestment Risk
Sequential Pay CMO
Tranches

• Public Company Accounting Oversight Board (PCAOB)
• Public Elevator
• Public Income Notes (PINES)
• Public Income Notes (PINES)
• Publicly Traded Partnership
• Public Offering
• Public Offering Price (POP)
• Public Offering Price (POP)
• Public Sector Net Borrowing
• Public Securities Association Standard Prepayment Model (PSA)
• Public Securities Association Standard Prepayment Model (PSA)
• Public Unit Account
• Puke
• Pullback
• Pump And Dump
• Punter
• Purchase Acquisition
• Purchase and Resale Agreements (PRAs)
• Purchase and Resale Agreements (PRAs)
• Purchase And Sale Statement (P&S)
• Purchase And Sale Statement (P&S)
• Purchase Fund
• Purchase-Money Mortgage
• Purchase Mortgage Market
• Purchase Price