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Collateralized Bond Obligation - CBO
What does it mean?
An investment-grade bond backed by a pool of junk bonds. Junk bonds are typically not investment grade, but because they pool several types of credit quality bonds together, they offer enough diversification to be "investment grade."
In Other Words...
Similar in structure to a collateralized mortgage obligation (CMO), but different in that CBOs represent different levels of credit risk, not different maturities.
Related Links
Junk Bonds: Everything You Need to Know - Don't be fooled by the name--junk bonds may be for you if you know how to analyze them.
Bond Basics Tutorial - What are bonds and do they belong in your portfolio? Get all the answers in this comprehensive tutorial.
Related Terms
Bond | Collateralized Debt Obligation (CDO) | Collateralized Mortgage Obligation (CMO) | Investment Grade | Junk Bond | Structured Finance | Synthetic CDO
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