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Companion/Support Bonds

Trading Term

A Collateralized Mortgage Obligation that absorbs the prepayments from the Planned Amortization Class (PAC) and Targeted Amortization Class (TAC) tranches. Once the scheduled payments have been made to the tranches, any excess or shortfall is reflected in the companion tranche. Due to the higher degree of volatility of cash flow and a high variability of average life, holders are compensated with a higher yield.

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