INVESTING IN BONDS

Please be advised that, as of October 1, 2012, investinginbonds.com will cease to provide certain bond pricing information currently available on this site. Much of this information is made available to the public by financial industry regulators. Direct links to these sources include: FINRA's Bond Section of the FINRA Market Data Center:

The

ADVANCED SEARCH INVESTING IN BONDS � 2005-2013 The Securities Industry and Financial Markets Association. Privacy Policy; Legal Notices; About The Securities Industry and Financial Markets Association BENEFITS OF INVESTING IN CORPORATE BONDS Benefits of Investing in Corporate Bonds. Investors buy corporates for a variety of reasons: Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is, however, generally accompanied by higher risks. Dependable income. UNDERSTANDING YIELDS Understanding Yields. Yield is a critical concept in bond investing, because it is the tool you use to measure the return of one bond against another. It enables you to make informed decisions about which bond to buy. In essence, yield is the rate of return on your bond investment. However, it is not fixed, like a bond’s stated interest

rate.

HOW ARE ABS STRUCTURED? Frequently, ABS are issued as sequential-pay securities. This means that the first tranche (the one with the shortest average life) receives all available principal payments until it is retired; only then does the second tranche begin to receive principal; and so on. (The alternative structure is pro rata pay, under which all tranches

receive

BOND MARKETS DEFINED Asset-backed securities, called ABS, are bonds or notes backed by financial assets. Typically these assets consist of receivables other than mortgage loans, such as credit card receivables, auto loans, manufactured-housing contracts and home-equity loans. There is approximately $1.70 trillion in debt currently outstanding. HOW DO CREDIT RATINGS AFFECT YIELD? * The ratings from Aa to Ca by Moody’s may be modified by the addition of a 1, 2 or 3 to show relative standing within the category. ** The ratings from AA to CC by Standard & Poor’s and Fitch Ratings may be modified by the addition of a plus or minus sign to show relative standing within the category. READING BOND PRICES IN THE NEWSPAPER Prices in the bid and ask columns are percentages of the bond’s face value of $1,000. So, a bid of 105:12 means that a buyer was willing to pay $1053.75, compared to the seller’s lowest asking price, 105:14, or $1054.38, a difference of 63 cents per thousand. (The numbers after the colons represent 32nds, so 12/32nds, for example, would THE ADVANTAGES OF TAX EXEMPTION The Advantages of Tax Exemption. Under present federal income tax law, the interest income you receive from investing in municipal bonds is free from federal income taxes.*. In most states, interest income received from securities issued by governmental units within TAXES AND MARKET DISCOUNT ON TAX-EXEMPTS For OID bonds, market discount is the excess, if any, of the revised issue price over the purchase price. As with other tax-exempt securities, market discount on OID bonds is accreted from the date the bond is purchased to the maturity date. Accreted market discount is taxed as ordinary income at the time a bond is sold or redeemed.

INVESTING IN BONDS

Please be advised that, as of October 1, 2012, investinginbonds.com will cease to provide certain bond pricing information currently available on this site. Much of this information is made available to the public by financial industry regulators. Direct links to these sources include: FINRA's Bond Section of the FINRA Market Data Center:

The

ADVANCED SEARCH INVESTING IN BONDS � 2005-2013 The Securities Industry and Financial Markets Association. Privacy Policy; Legal Notices; About The Securities Industry and Financial Markets Association BENEFITS OF INVESTING IN CORPORATE BONDS Benefits of Investing in Corporate Bonds. Investors buy corporates for a variety of reasons: Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is, however, generally accompanied by higher risks. Dependable income. UNDERSTANDING YIELDS Understanding Yields. Yield is a critical concept in bond investing, because it is the tool you use to measure the return of one bond against another. It enables you to make informed decisions about which bond to buy. In essence, yield is the rate of return on your bond investment. However, it is not fixed, like a bond’s stated interest

rate.

HOW ARE ABS STRUCTURED? Frequently, ABS are issued as sequential-pay securities. This means that the first tranche (the one with the shortest average life) receives all available principal payments until it is retired; only then does the second tranche begin to receive principal; and so on. (The alternative structure is pro rata pay, under which all tranches

receive

BOND MARKETS DEFINED Asset-backed securities, called ABS, are bonds or notes backed by financial assets. Typically these assets consist of receivables other than mortgage loans, such as credit card receivables, auto loans, manufactured-housing contracts and home-equity loans. There is approximately $1.70 trillion in debt currently outstanding. HOW DO CREDIT RATINGS AFFECT YIELD? * The ratings from Aa to Ca by Moody’s may be modified by the addition of a 1, 2 or 3 to show relative standing within the category. ** The ratings from AA to CC by Standard & Poor’s and Fitch Ratings may be modified by the addition of a plus or minus sign to show relative standing within the category. READING BOND PRICES IN THE NEWSPAPER Prices in the bid and ask columns are percentages of the bond’s face value of $1,000. So, a bid of 105:12 means that a buyer was willing to pay $1053.75, compared to the seller’s lowest asking price, 105:14, or $1054.38, a difference of 63 cents per thousand. (The numbers after the colons represent 32nds, so 12/32nds, for example, would THE ADVANTAGES OF TAX EXEMPTION The Advantages of Tax Exemption. Under present federal income tax law, the interest income you receive from investing in municipal bonds is free from federal income taxes.*. In most states, interest income received from securities issued by governmental units within TAXES AND MARKET DISCOUNT ON TAX-EXEMPTS For OID bonds, market discount is the excess, if any, of the revised issue price over the purchase price. As with other tax-exempt securities, market discount on OID bonds is accreted from the date the bond is purchased to the maturity date. Accreted market discount is taxed as ordinary income at the time a bond is sold or redeemed.

ABOUT THIS SITE

About This Site About This Site. Geared toward many types of investors-from beginners to experienced equity investors who are new to bonds to sophisticated bond investors-Investinginbonds.com is a unique source of bond price information and includes a wide variety of market data, news, commentary and information about bonds. TAXATION OF MUNICIPAL BONDS Taxation of Municipal Bonds. This article will discuss the federal and state tax consequences of owning “municipal bonds.” At the outset, it should be understood that the term “municipal bonds” is typically used to describe all tax-exempt bonds, whether or not they are actually issued by a municipality (as opposed to a state, county or other political subdivision). READING BOND PRICES IN THE NEWSPAPER Prices in the bid and ask columns are percentages of the bond’s face value of $1,000. So, a bid of 105:12 means that a buyer was willing to pay $1053.75, compared to the seller’s lowest asking price, 105:14, or $1054.38, a difference of 63 cents per thousand. (The numbers after the colons represent 32nds, so 12/32nds, for example, would WHO INVESTS IN HIGH-YIELD BONDS? Insurance companies invest their own capital in high-yield bonds. They also participate in the market through “separate accounts” offered in variable insurance and annuity products. Pension funds invest in high-yield bonds to earn higher rates of return than those available from investment-grade bonds, or as an alternative to investing in THE AMT AND MUNI BONDS The AMT and Muni Bonds. Even after April 15, investors who own certain types of municipal bonds should be aware of potential Alternate Minimum Tax (AMT) liabilities. AMT is a separate tax computation under the Internal Revenue Code that, in effect, eliminates many deductions and credits and creates a tax liability for an individual who would INTEREST RATES AND YIELDS ON ABS Interest Rates and Yields on ABS Yield. As with any fixed-income securities, the yield on ABS depends on the purchase price in relation to the interest rate (which may be fixed or floating) and the length of time the principal is outstanding. RATING CHANGES AND YOUR INVESTMENTS Answer. When a bond’s rating is downgraded, investors should assess whether the problem is temporary or longer term. You should also determine your risk tolerance and review your investment strategy. Your investment advisor can help you determine if the bonds still fit your investment objectives. Question. STATE TAXATION OF MUNICIPAL BONDS FOR INDIVIDUALS For example, a state may not generally exempt bonds, but some bonds may be specifically exempted by the laws authorizing their issuance. Income earned from a bond issued by another state is taxable only if such other state imposes a tax on Utah bonds. Interest from some obligations is exempt from tax. Taxable only if long form is used. THE GSE DEBT MARKET: AN OVERVIEW The GSE Debt Market: An Overview GSE Issuers and Their Financing Needs. Government-sponsored enterprises (GSEs) are financing entities created by Congress to fund loans to certain groups of borrowers such as homeowners, farmers and students. QUESTIONS YOU SHOULD ASK BEFORE INVESTING IN CMOS Questions You Should Ask Before Investing in CMOs. Before investing in a CMO, you should be able to answer the following questions with the help of your investment professional. private label? If it is a private-label CMO, what is its credit rating? Do I have a prospectus, prospectus supplement, or offering circular available for this CMO?

INVESTING IN BONDS

Learn More. Welcome to Investing In Bonds.com! Just starting out? Need to learn more about bonds or investment strategies? Browse the articles, checklists, and guides found here. ADVANCED SEARCH INVESTING IN BONDS � 2005-2013 The Securities Industry and Financial Markets Association. Privacy Policy; Legal Notices; About The Securities Industry and Financial Markets Association BENEFITS OF INVESTING IN CORPORATE BONDS Benefits of Investing in Corporate Bonds. Investors buy corporates for a variety of reasons: Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. GLOSSARY OF BOND TERMS Glossary of Bond Terms Glossary of Bond Terms. A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z. accreted value BOND MARKETS DEFINED Bond Markets & Prices Bond Markets Defined. Notice of Site-Wide Change. Please be advised that, as of October 1, 2012, investinginbonds.com will cease to provide certain bond pricing information currently available on this site. THE ADVANTAGES OF TAX EXEMPTION Effect of Federal Income Taxes on Yields of Tax-Exempt and Taxable Instruments 5.0% Tax-exempt Bond 7.0% Taxable Bond; Cash investment:

$30,000: $30,000

AGENCY VS. PRIVATELY ISSUED CMOS Agency vs. Privately Issued CMOs. Many mortgage pass-through securities are guaranteed by the Government National Mortgage Association (GNMA, or Ginnie Mae), an agency of the U.S. government, or by U.S. government-sponsored enterprises (GSE) such as the Federal National Mortgage Association (FNMA, or Fannie Mae) or the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). STATE TAXATION OF MUNICIPAL BONDS FOR INDIVIDUALS State Taxation of Municipal Bonds for Individuals Notes: Bonds are designated "X" if taxable. All others are exempt or excluded from tax, or no income taxes are levied by those states. QUESTIONS YOU SHOULD ASK BEFORE INVESTING IN CMOS Questions You Should Ask Before Investing in CMOs. Before investing in a CMO, you should be able to answer the following questions with the help of your investment professional. TAXES AND MARKET DISCOUNT ON TAX-EXEMPTS Taxes and Market Discount on Tax-Exempts. The U.S. tax code contains a provision governing the tax treatment of bonds, including municipal securities, purchased at a market discount.

INVESTING IN BONDS

Learn More. Welcome to Investing In Bonds.com! Just starting out? Need to learn more about bonds or investment strategies? Browse the articles, checklists, and guides found here. ADVANCED SEARCH INVESTING IN BONDS � 2005-2013 The Securities Industry and Financial Markets Association. Privacy Policy; Legal Notices; About The Securities Industry and Financial Markets Association BENEFITS OF INVESTING IN CORPORATE BONDS Benefits of Investing in Corporate Bonds. Investors buy corporates for a variety of reasons: Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. GLOSSARY OF BOND TERMS Glossary of Bond Terms Glossary of Bond Terms. A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z. accreted value BOND MARKETS DEFINED Bond Markets & Prices Bond Markets Defined. Notice of Site-Wide Change. Please be advised that, as of October 1, 2012, investinginbonds.com will cease to provide certain bond pricing information currently available on this site. THE ADVANTAGES OF TAX EXEMPTION Effect of Federal Income Taxes on Yields of Tax-Exempt and Taxable Instruments 5.0% Tax-exempt Bond 7.0% Taxable Bond; Cash investment:

$30,000: $30,000

AGENCY VS. PRIVATELY ISSUED CMOS Agency vs. Privately Issued CMOs. Many mortgage pass-through securities are guaranteed by the Government National Mortgage Association (GNMA, or Ginnie Mae), an agency of the U.S. government, or by U.S. government-sponsored enterprises (GSE) such as the Federal National Mortgage Association (FNMA, or Fannie Mae) or the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). STATE TAXATION OF MUNICIPAL BONDS FOR INDIVIDUALS State Taxation of Municipal Bonds for Individuals Notes: Bonds are designated "X" if taxable. All others are exempt or excluded from tax, or no income taxes are levied by those states. QUESTIONS YOU SHOULD ASK BEFORE INVESTING IN CMOS Questions You Should Ask Before Investing in CMOs. Before investing in a CMO, you should be able to answer the following questions with the help of your investment professional. TAXES AND MARKET DISCOUNT ON TAX-EXEMPTS Taxes and Market Discount on Tax-Exempts. The U.S. tax code contains a provision governing the tax treatment of bonds, including municipal securities, purchased at a market discount.

ABOUT THIS SITE

About This Site About This Site. Geared toward many types of investors-from beginners to experienced equity investors who are new to bonds to sophisticated bond investors-Investinginbonds.com is a unique source of bond price information and includes a wide variety of market data, news, commentary and information about bonds. TAXATION OF MUNICIPAL BONDS Taxation of Municipal Bonds. This article will discuss the federal and state tax consequences of owning “municipal bonds.” At the outset, it should be understood that the term “municipal bonds” is typically used to describe all tax-exempt bonds, whether or not they are actually issued by a municipality (as opposed to a state, county or other political subdivision). HOW ARE ABS STRUCTURED? How are ABS Structured? Fully Amortizing. Securities that return principal to investors throughout the life of the security are said to be fully amortizing. INCOME, CAPITAL GAINS AND TAXATION Income, Capital Gains and Taxation Distributions. Fixed-rate capital securities pay monthly, quarterly or semiannual distributions that, like interest payments on bonds, are fully taxable to the investor. AGENCY VS. PRIVATE LABEL Agency vs. Private Label. Agency.Many mortgage pass-through securities are guaranteed by Ginnie Mae, an agency of the U.S. government, or by U.S. government-sponsored enterprises (GSEs) such as Fannie Mae or

Freddie Mac.

THE VARIOUS TYPES OF CMOS The Various Types of CMOs. The most basic CMO structure has tranches that pay in a strict sequence. Each tranche receives regular interest payments, but the principal payments received are made to the first tranche alone, until it is completely retired. RATING CHANGES AND YOUR INVESTMENTS Rating Changes and Your Investments What You Should Know. A variety of events or occurrences that can affect the ability of an issuer to repay the principal and interest on HOW DO CREDIT RATINGS AFFECT YIELD? * The ratings from Aa to Ca by Moody’s may be modified by the addition of a 1, 2 or 3 to show relative standing within the category. ** The ratings from AA to CC by Standard & Poor’s and Fitch Ratings may be modified by the addition of a plus or minus sign to show relative standing within the category. QUESTIONS YOU SHOULD ASK BEFORE INVESTING IN CMOS Questions You Should Ask Before Investing in CMOs. Before investing in a CMO, you should be able to answer the following questions with the help of your investment professional.

PREPAYMENT MODELS

Prepayment Models Prepayment Models. Investors in ABS are typically concerned about the likelihood and extent of prepayment. That is, they worry about receiving all or part of the principal of the underlying debt before it is due (in the case of amortizing assets) or before it is expected (in the case of nonamortizing assets).

INVESTING IN BONDS

Please be advised that, as of October 1, 2012, investinginbonds.com will cease to provide certain bond pricing information currently available on this site. Much of this information is made available to the public by financial industry regulators. Direct links to these sources include: FINRA's Bond Section of the FINRA Market Data Center:

The

ADVANCED SEARCH INVESTING IN BONDS � 2005-2013 The Securities Industry and Financial Markets Association. Privacy Policy; Legal Notices; About The Securities Industry and Financial Markets Association BENEFITS OF INVESTING IN CORPORATE BONDS Benefits of Investing in Corporate Bonds. Investors buy corporates for a variety of reasons: Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is, however, generally accompanied by higher risks. Dependable income. BOND MARKETS DEFINED Asset-backed securities, called ABS, are bonds or notes backed by financial assets. Typically these assets consist of receivables other than mortgage loans, such as credit card receivables, auto loans, manufactured-housing contracts and home-equity loans. There is approximately $1.70 trillion in debt currently outstanding. UNDERSTANDING YIELDS Understanding Yields. Yield is a critical concept in bond investing, because it is the tool you use to measure the return of one bond against another. It enables you to make informed decisions about which bond to buy. In essence, yield is the rate of return on your bond investment. However, it is not fixed, like a bond’s stated interest

rate.

TAXATION OF MUNICIPAL BONDS Taxation of Municipal Bonds. This article will discuss the federal and state tax consequences of owning “municipal bonds.” At the outset, it should be understood that the term “municipal bonds” is typically used to describe all tax-exempt bonds, whether or not they are actually issued by a municipality (as opposed to a state, county or other political subdivision). STATE TAXATION OF MUNICIPAL BONDS FOR INDIVIDUALS For example, a state may not generally exempt bonds, but some bonds may be specifically exempted by the laws authorizing their issuance. Income earned from a bond issued by another state is taxable only if such other state imposes a tax on Utah bonds. Interest from some obligations is exempt from tax. Taxable only if long form is used. HOW HIGH-YIELD BONDS ARE TAXED After December 31, 2000 if you sell a bond after holding it for more than 5 years, your gains will be taxed at a rate of 18%. Conversely, if you sell a bond for less than you paid, you may incur a capital loss. You may offset an unlimited amount of such losses dollar-for-dollar against capital gains you have realized on other

investments (bonds

AGENCY VS. PRIVATELY ISSUED CMOS Agency vs. Privately Issued CMOs. Many mortgage pass-through securities are guaranteed by the Government National Mortgage Association (GNMA, or Ginnie Mae), an agency of the U.S. government, or by U.S. government-sponsored enterprises (GSE) such as the Federal National Mortgage Association (FNMA, or Fannie Mae) or the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). CMO SETTLEMENT DATES AND PAYMENT DATES CMO Settlement Dates and Payment Dates. Investors who purchase CMOs at issuance—the “issue date”—may find that their transaction takes up to a month to “settle” because of the time required to assemble the collateral, deposit it with the trustee, and complete other legal and reporting requirements.

INVESTING IN BONDS

Please be advised that, as of October 1, 2012, investinginbonds.com will cease to provide certain bond pricing information currently available on this site. Much of this information is made available to the public by financial industry regulators. Direct links to these sources include: FINRA's Bond Section of the FINRA Market Data Center:

The

ADVANCED SEARCH INVESTING IN BONDS � 2005-2013 The Securities Industry and Financial Markets Association. Privacy Policy; Legal Notices; About The Securities Industry and Financial Markets Association BENEFITS OF INVESTING IN CORPORATE BONDS Benefits of Investing in Corporate Bonds. Investors buy corporates for a variety of reasons: Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is, however, generally accompanied by higher risks. Dependable income. BOND MARKETS DEFINED Asset-backed securities, called ABS, are bonds or notes backed by financial assets. Typically these assets consist of receivables other than mortgage loans, such as credit card receivables, auto loans, manufactured-housing contracts and home-equity loans. There is approximately $1.70 trillion in debt currently outstanding. UNDERSTANDING YIELDS Understanding Yields. Yield is a critical concept in bond investing, because it is the tool you use to measure the return of one bond against another. It enables you to make informed decisions about which bond to buy. In essence, yield is the rate of return on your bond investment. However, it is not fixed, like a bond’s stated interest

rate.

TAXATION OF MUNICIPAL BONDS Taxation of Municipal Bonds. This article will discuss the federal and state tax consequences of owning “municipal bonds.” At the outset, it should be understood that the term “municipal bonds” is typically used to describe all tax-exempt bonds, whether or not they are actually issued by a municipality (as opposed to a state, county or other political subdivision). STATE TAXATION OF MUNICIPAL BONDS FOR INDIVIDUALS For example, a state may not generally exempt bonds, but some bonds may be specifically exempted by the laws authorizing their issuance. Income earned from a bond issued by another state is taxable only if such other state imposes a tax on Utah bonds. Interest from some obligations is exempt from tax. Taxable only if long form is used. HOW HIGH-YIELD BONDS ARE TAXED After December 31, 2000 if you sell a bond after holding it for more than 5 years, your gains will be taxed at a rate of 18%. Conversely, if you sell a bond for less than you paid, you may incur a capital loss. You may offset an unlimited amount of such losses dollar-for-dollar against capital gains you have realized on other

investments (bonds

AGENCY VS. PRIVATELY ISSUED CMOS Agency vs. Privately Issued CMOs. Many mortgage pass-through securities are guaranteed by the Government National Mortgage Association (GNMA, or Ginnie Mae), an agency of the U.S. government, or by U.S. government-sponsored enterprises (GSE) such as the Federal National Mortgage Association (FNMA, or Fannie Mae) or the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). CMO SETTLEMENT DATES AND PAYMENT DATES CMO Settlement Dates and Payment Dates. Investors who purchase CMOs at issuance—the “issue date”—may find that their transaction takes up to a month to “settle” because of the time required to assemble the collateral, deposit it with the trustee, and complete other legal and reporting requirements.

ABOUT THIS SITE

About This Site About This Site. Geared toward many types of investors-from beginners to experienced equity investors who are new to bonds to sophisticated bond investors-Investinginbonds.com is a unique source of bond price information and includes a wide variety of market data, news, commentary and information about bonds. ABOUT CORPORATE BONDS Answer. Bonds represent debt which a company has agreed to repay with interest. As such, when a company files for federal bankruptcy protection, bondholders have a better chance of getting repaid than stockholders. While bankruptcy laws determine the order of repayment, stockholders, considered owners of the company, have the last claim on

assets.

PREPAYMENT MODELS

The HEP curve is a prepayment scale (ranging from 0% to 100%) for HELs that captures the more rapid plateau for home-equity prepayments vis-a-vis that of traditional mortgages. It is a 10-month seasoning ramp with even step-ups, terminating at the final HEP percentage in the 10th month. The standard HEP is 20%; it equals 2% CPR in the first HOW HIGH-YIELD BONDS ARE TAXED After December 31, 2000 if you sell a bond after holding it for more than 5 years, your gains will be taxed at a rate of 18%. Conversely, if you sell a bond for less than you paid, you may incur a capital loss. You may offset an unlimited amount of such losses dollar-for-dollar against capital gains you have realized on other

investments (bonds

GLOSSARY OF BOND TERMS A long-term bond the interest rate of which is adjusted periodically, typically based upon specific market indicators. variable-rate demand obligation (VRDO) A bond which bears interest at a variable, or floating, rate established at specified intervals (e.g., flexible, daily, weekly, monthly or annually). THE CMO: AN OVERVIEW The CMO: An Overview. Collateralized Mortgage Obligations (CMOs) 1 —also known as Real Estate Mortgage Investment Conduits (REMICs)—are one of the most innovative investment vehicles available today, offering regular payments, relative safety, and notable yield advantages over other fixed-income securities of comparable credit quality. $222.3 billion in new agency CMOs were

issued in 2007

TYPES OF CMOS

Types of CMOs Sequential Pay. The most basic CMO structure is made up of tranches that pay in a strict sequence. Each tranche receives regular interest payments, but principal payments received are made to the first tranche alone until it is completely retired. THE GSE DEBT MARKET: AN OVERVIEW The GSE Debt Market: An Overview GSE Issuers and Their Financing Needs. Government-sponsored enterprises (GSEs) are financing entities created by Congress to fund loans to certain groups of borrowers such as homeowners, farmers and students. THE VARIOUS TYPES OF CMOS The Various Types of CMOs. The most basic CMO structure has tranches that pay in a strict sequence. Each tranche receives regular interest payments, but the principal payments received are made to the first tranche alone, until it is completely retired. Once the first tranche is retired, principal payments are applied to the second tranche CMO SETTLEMENT DATES AND PAYMENT DATES CMO Settlement Dates and Payment Dates. Investors who purchase CMOs at issuance—the “issue date”—may find that their transaction takes up to a month to “settle” because of the time required to assemble the collateral, deposit it with the trustee, and complete other legal and reporting requirements.

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