Certificate of Accrual on Treasury Securities
A formerly-issued
Treasury security whose
coupons had been
stripped by an intermediary. CATS therefore paid no
interest. They were
sold at a significant
discount from
par and
matured at par. CATS fluctuated in
price, sometimes dramatically, because changes in
interest rates made them more or less desirable. CATS could be invested
IRAs and other pension accounts; they were also exempt from state and local taxes. They were
issued between 1982 and 1986, becoming obsolete when the U.S. Treasury began issuing its own stripped bonds. See also:
Zero-Coupon Bonds.
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Certificate of Accrual on Treasury Securities (CATS).
CATS are US Treasury zero-coupon bonds that are sold at deep discount to par, or face value. Like other zeros, the interest isn't actually paid during the bond's term but accumulates so that you receive face value at maturity.
You can use CATS in your long-term portfolio to provide money for college tuition or retirement. For example, you may purchase them in a tax-deferred IRA or a tax-free Roth IRA or Coverdell education savings account (ESA).
As with other zeros, CATS prices can be volatile, so you risk losing some of your principal if you sell before maturity. And like other federal government issues, the interest is free of state and local income tax but subject to federal income tax.