coupon stripping

coupon stripping

The purchase of ordinary bonds (usually, U.S. Treasury bonds) that are then repackaged such that the receipts to interest and corpus payments are sold separately. The effect is to transform a security paying regular interest into zero-coupon receipts of varying maturities. Sold under a variety of names such as CATS®, LIONS, and TIGRSM, these investments have proved popular for tax-sheltered accounts such as IRAs. Generic names for them include animals and felines. Also called stripping.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
In 2002, the Service released guidance on the application of the coupon stripping rules to certain fees payable out of mortgage payments received by mortgage pool trusts.
Forget pork bellies, futures and bond coupon stripping derivatives.
Contrast the need to execute and sometimes record mortgage assignments with coupon stripping and repackaging of mortgage cash flows, book-entry issuance and transfer of mortgage-backed securities (MBS), and electronic funds transfers for purchases of mortgages.
Given the investment banks' profit from creating zeros via coupon stripping, one might wonder why the Treasury did not, itself, immediately issue zero-coupon debt (other than nonmarketable Series EE Savings Bonds).
91-46 holds that where mortgage servicing is retained at an amount that is deemed to be in excess of reasonable compensation for the services to be performed (i.e., excess servicing), the mortgages are "stripped bonds" within the meaning of Code Section 1286(e) (2), the bond coupon stripping rule.