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.
Compare the following Treasury instruments:
Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 25 bonus reputation points for each definition that is accepted.
Is this definition wrong? Let us know by posting to the forum and we will correct it.