Offbeat Offerings: Treasury STRIPS
by Cara Scatizzi
STRIPS, an acronym for Separate Trading of Registered Interest and Principal of Securities, turn coupon-paying Treasury bonds into zero-coupon bonds by taking the interest and principal components of Treasury notes and bonds and selling them as separate securities. STRIPS are fully backed by the U.S. government and were first introduced to the public in 1985. While the government does not itself issue zero-coupon bonds with longer-term maturities, these stripped notes and bonds are, in essence, a long-term zero-coupon bond backed by the government.
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