Definition of 'Treasury STRIPS'
An acronym for 'separate trading of registered interest and principal securities'. Treasury STRIPS are fixed-income securities sold at a significant discount to face value and offer no interest payments because they mature at par.
Investopedia explains 'Treasury STRIPS'
Backed by the U.S. government, STRIPS, which were first introduced in 1985, offer minimal risk and some tax benefits in certain states, replacing TIGRs and CATS as the dominant zero-coupon U.S. security.
Although you receive no tangible income, you typically still have to pay federal income tax on the bond's accretion for the year.