Separate Trading of Registered Interest and Principal Securities, Treasury STRIPS
Definition of 'Separate Trading of Registered Interest and Principal Securities, Treasury STRIPS'
In the days before computerization the paper bonds had detachable coupons that were redeemed when they became due. The act of tearing these strips of coupons off and trading them separately lent its name to STRIPS. When the government issues treasury instruments with coupons such as T-Notes, T-Bonds and TIPS it always sells them intact. The act of stripping the coupons in done in the secondary market so they can only be bought from brokers and not from the United States Treasury.
A bond with its coupons stripped off has the same characteristics as a zero-coupon bond.
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