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COMPANION BOND Definition & Legal Meaning

Definition & Citations:

A TRANCHE of a COLLATERALIZED MORTGAGE OBLIGATION that accompanies PLANNED AMORTIZATION CLASS (PAC) BONDS and TARGETED AMORTIZATION CLASS (TAC) BONDS. The companion serves to absorb PREPAYMENT RISK, giving PACs and TACs greater CASH FLOW, and thus price, stability. Also known as SUPPORT BOND.


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