STRIPS

See Separate Trading of Registered Interest and Principal Securities.

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STRIPS

See Separate Trading of Registered Interest and Principal of Securities.

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STRIPS

A Treasury security whose coupons have been separated from the principal. STRIPS therefore pay no interest. They are sold at a significant discount from par and mature at par. STRIPS fluctuate in price, sometimes dramatically, because changes in interest rates made them more or less desirable. STRIPS can be invested IRAs and other pension accounts; however, unlike other Treasury securities, they are subject to federal taxes. STRIPS are quoted according to their yields, rather than their prices. They began to be issued in 1985, rendering obsolete similar securities, such as CATS, which behaved similarly. See also: zero-coupon bond.

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STRIPS. STRIPS, an acronym for separate trading of registered interest and principal of securities, are special issues of US Treasury zero-coupon bonds. They're created and sold by brokerage firms, not by the government.

The bonds are prestripped, which means that the issue is separated into the principal and a series of individual interest payments, and each of those parts is offered separately as a zero-coupon security.