tranche

American  

[trahnch, trahnsh, trahnsh] / trɑntʃ, trɑ̃ʃ, trɑ̃ʃ /

noun

1. Finance.

   1. one part or division of a larger unit, as of an asset pool or investment.

      The loan will be repaid in three tranches.

   2. a group of securities that share a certain characteristic and form part of a larger offering.

      The second tranche of the bond issue has a five-year maturity.

2. any part, division, or installment.

   We’ve hired the first tranche of researchers.

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verb (used with object)

tranched, tranching

1. Finance. to divide into parts.

   tranched debt;

   A credit portfolio can be tranched into a variety of components that are then further subdivided.

tranche British  

/ trɑːnʃ /

noun

1. a portion or instalment, esp of a loan or share issue

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Usage

What does tranche mean? In finance, a tranche is a portion of a security, such as a loan, mortgage, stock, or bond, that can be sold to an investor. Securities are sometimes broken up to make them easier to sell. There are many different kinds of tranches based on characteristics such as risk, time, or whether they are backed up by assets. For example, banks loan money to people to buy homes. Often, such mortgages are paid back over 15 to 30 years. Rather than waiting for a person to repay a mortgage over 30 years, the bank will sell the mortgage to an investor so it will have money to lend to other customers. Few investors are willing to risk buying a 30-year mortgage from a bank. Instead the bank will pool a bunch of mortgages together and divide (tranche) them into different bundles they can sell to investors. For example, one tranche might include the first three years of each mortgage, another tranche will include the first five years, and another the full 30 years. This allows investors to buy the low-risk tranche of three-year mortgages that will mature (come due) soon but have a low interest rate. Or they can buy the riskier tranche of 30-year mortgages that will have higher interest rates. Tranching helps the bank get more money to lend to customers and helps investors adjust their investment depending on how much risk they want to take. In finance, tranche can also be used as a verb to mean to cut something into parts. Outside of finance, tranche can be used more generally to refer to a division, slice, or portion of something. Example: I don’t need money right away so I have money invested in a bunch of long-term tranches.

Etymology

Origin of tranche

First recorded in 1930–35; from French: literally, “a slice,” from Old French trenchier, trancher “to cut”; see trench

Explanation

A tranche is a piece or a part of something, usually money. An installment of a loan is a tranche. The noun tranche comes from the French word trancher, "to cut," which should help you remember that a tranche is a portion of something, not the whole thing. Usually, it's part of a larger sum of money, like a mortgage payment, half of a bonus payment, or an installment of lottery winnings. People who work in banking and finance use tranche to mean one bond or security within a larger financial deal.

Example Sentences

Current advanced sensors now in development include the Missile Defense Agency’s Hypersonic and Ballistic Tracking Space Sensor satellites and the Space Force system called Tranche missile-tracking satellites.

From Washington Times • Aug. 9, 2023

The next major group of satellites, called Tranche 1, will begin launching in late 2024 and will include 126 transport layer satellites, 35 tracking satellites and 12 tactical demonstration satellites.

From Washington Times • Apr. 5, 2023

France last year placed a "Tranche 5" order for 42 Rafales.

From Reuters • Mar. 9, 2023

Her husband, Tyler Dutton, works at Tranche for the winemaking Corliss family.

From Seattle Times • Nov. 4, 2022

I hope by this autumn," he continues, "to show the fallacy of this reasoning, by opening a safe and expeditious communication to La Tranche.

From Toronto of Old by Scadding, Henry