It stands for commercial mortgage-backed securities (CMBS) interest only (IO). These IOs (stripped mortgage products) are coupons stripped from an underlying pool of commercial mortgages. This way, bond issuers can sell a bond with premium collateral at a price close to par. For example, a commercial mortgage collateral with a 7% coupon could be stripped into two parts: a 1.8% IO and a bond (created out of the collateral) at par with a 6.2% coupon.
March 17, 2025
