The last tranche in a collateralized mortgage obligation (CMO). Periodic interest accrues on an accrual tranche but no cash payments will be made until previous tranches from the same CMO are retired. Interest payments on a CMO are disbursed to the A-tranche, B-tranche, C-tranche, floater, and inverse floater each month, based on the amount of principal outstanding at the beginning of the period. The accrual tranche is the only tranche that doesn’t receive interest each month; rather interest accrues and is added to the principal balance. The accrual tranche consists of accrual bonds. An accrual bond receives no payments until all previous tranches are paid back. Although an accrual bond carries an explicit coupon rate, the payable interest is accrued and added to the principal balance of the tranche (that is why accrual bonds are also known as accretion bonds).

The accrual tranche is also known as a Z-tranche.