Accrual Bond Law and Legal Definition

Accrual bond refers to a bond from which no principal or interest payment is made until any bonds issued earlier have been fully paid. Here, interest is added to the principal balance of the bond and is either paid at maturity or, at some point. Accrual bond has the important advantage of being free from reinvestment risk. Accrual bond is considered as the last collateralized mortgage obligation issue. It is also known as Z-bond.