Treasury STRIPS

Loading the player...

What are 'Treasury STRIPS'

STRIPS is 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.

BREAKING DOWN '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.

RELATED TERMS
  1. Futures Strip

    The sale or purchase of futures in sequential delivery months ...
  2. Certificates Of Accrual On Treasury ...

    Issued by the U.S. Treasury and stripped by a financial intermediary, ...
  3. Treasury Investment Growth Receipts ...

    Stripped Treasury securities offered at a significant discount ...
  4. Interest Only (IO) Strips

    The interest portion of mortgage, Treasury or bond payments, ...
  5. Coupon Stripping

    The separation of a bond's periodic interest payments from its ...
  6. Servicing Strip

    A security created by the stream of cash flows that result from ...
Related Articles
  1. Bonds & Fixed Income

    What are Treasury STRIPS?

    STRIPS is an acronym that stands for Separate Trading of Registered Interest and Principal Securities.
  2. Bonds & Fixed Income

    Introduction To STRIPS

    STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how.
  3. Professionals

    Treasury STRIPS

    FINRA Series 7 Online Study Guide Section 4
  4. Professionals

    U.S. Government Securities

    FINRA/NASAA Series 65: Section 8 U.S. Government Securities. In this section treasury bills, treasury notes, treasury bonds, treasury STRIPS and TIPS.
  5. Professionals

    Government Bonds

    CFA Level 1 - Government Bonds. Learn the various types of U.S. Government issued treasury securities. Also covers on and off-the-run securities and how to strip a bond.
  6. Professionals

    Arbitrage-free Valuation Approach

    CFA Level 1 - Arbitrage-free Valuation Approach. Learn how investors can determine the price of bonds using arbitrage-free valuation. Also describes the actions for acting on an arbitrage.
  7. Options & Futures

    20 Investments: Zero-Coupon Securities

    What Is It? A zero-coupon security, or "stripped bond", is basically a regular coupon-paying bond without the coupons. The process of "stripping" or "zeroing" a bond is usually done by a brokerage ...
  8. Professionals

    Types Of Government Securities

    Series EE Bonds: The series EE bonds are commonly known as savings bonds. They are purchased directly from the US government at a discount from their face value, typically 50%. The Series EE ...
  9. Professionals

    U.S. Government Bonds and Agency Securities

    U.S. Government Bonds and Agency Securities
  10. Bonds & Fixed Income

    Introduction to Treasury Securities

    Purchasing bonds that are backed by the full faith and credit of the U.S. government can provide steady guaranteed income and peace of mind. Knowing the characteristics of each type of treasury ...
RELATED FAQS
  1. What is a stripped bond?

    The quick answer to this question is that a stripped bond is a bond that has had its main components broken up into a zero-coupon ... Read Answer >>
  2. Why would a stock have no par value?

    People often get confused when they read about the "par value" for a stock. One reason for this is that the term has slightly ... Read Answer >>
  3. What are the maturity terms for Treasury bonds?

    Learn how treasury bonds pay interest, when they reach maturity and the differences between terms for treasury bonds and ... Read Answer >>
  4. What is the difference between par value and face value?

    Learn about the par value and face value of financial securities and what these synonymous terms mean about the value and ... Read Answer >>
  5. What is the difference between par value and market value?

    Learn about the difference between the par value and market value of financial securities, including the role they play in ... Read Answer >>
  6. If the price of the bond falls, does that mean the company won't pay me the par value?

    When you buy a bond, you are loaning money to the issuer. Because a bond is a loan, the interest paid to the bondholder is ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center