Mortgage-backed bonds differ from CMOs and pass-through securities in that there is no direct link between the cash flows on the mortgages and the interest and principal payments on the bonds.

Question

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Mortgage-backed bonds are backed by a pool of mortgages but do not have a direct link between the mortgage cash flows and the bond payments, unlike CMOs and pass-through securities which do.

Mortgage-Backed Bonds Differ from CMOs and Pass-Through Securities in That