A synonym for fungible issue; a debt issue that is attached to an existing issue (a parent bond), with the same specifications (such as coupon value, coupon frequency, maturity, etc.) as per the terms of the original agreement. A fungible issue constitutes debt securities issued by a firm on the same terms as a securities previously issued by the same firm, but probably with a different redemption yield.

On the funge date, the parent bond absorbs the funged issue(s) so that its amount outstanding is equal to the amount outstanding of the funged bond(s). In other words, the parent bond always reflects an increase in the amount outstanding equal to the funged amount (in a single funded issue or more, as the case might be). The new effective bonds arising from funge event are linked to the existing bond(s), reflecting the replacement relationship involved in the attachment process.

Sub-tranche may also denote a subdivision of a tranche. Particularly in a CDO squared, which is also known as a super tranche, the structure (super portfolio) consists of a number of sub-tranches. Losses are transferred from the sub-tranches to the super portfolio by adding up the losses on all sub-tranches weighted by each sub-tranche’s notional.