Strip Bond

(redirected from Strip Bonds)

Strip Bond

A bond, especially a U.S. Treasury security, that is traded separately from its coupons such that it pays no interest. Strip bonds are sold at a significant discount from par and mature at par. They fluctuate in price, sometimes dramatically, because changes in interest rates make them more or less desirable. They can be placed in IRAs and other pension accounts; however, unlike other Treasury securities, they are subject to federal taxes. Generally speaking, strip securities are quoted according to their yields rather than their prices. In 1985, the U.S. Treasury began issuing its own strip bonds, called STRIPS, which replaced other vehicles, such as CATS and TIGRS, that had been issued by the Treasury and stripped by another party.
References in periodicals archive ?
We still don't recommend opening long positions on strip bonds due to high uncertainty concerning some key questions, including situation in Greece and the probability of monetary stimulation by the FRS.
In that position, he managed a group of bond traders with responsibility for strip bonds, agency zeros and long Treasury coupons.
The Finance Ministry plans to issue strip bonds in fiscal 2001 to spur demand for Japanese government bonds (JGBs), ministry officials said Monday.
The ministry intends to submit a bill to enable the issuance of strip bonds to the regular Diet session convening Wednesday, they said.
The flotation of strip bonds will allow us to meet a wide range of investor needs,'' a ministry official said.
Buyers of Japanese government strip bonds, however, could be limited to corporate investors over the short-term due to the difficulties that tax authorities would face in assessing individual investors' JGB capital gains.
Holders of strip bonds are legally allowed to separate the bond into its interest payments, or coupons, and the principal, both of which are then traded as zero-coupon discount bonds as they pay no interest.
Strip bonds and interest rate snaps: some of the financial instruments sounded like erotic paraphernalia.
Jian Gao, vice chairman of the China Development Bank, has contributed to the introduction of new debt instruments in the interbank market, such as floating rate notes (FRNs), puttable bonds, callable bonds, strip bonds, 30-year bonds, swaption-embedded bonds, and forward rate bonds.
In addition, the panel proposed that the ministry issue so-called strip bonds to diversify the range of debt issues it offers and to reinvigorate the bond market.
It has been customized for the Canadian market to handle more than 20 corporate actions related to a variety of debt instruments, including complex instruments like strip bonds.