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By Staff Reporters
SPONSOR: http://www.MarcinkoAssociates.com
DEFINITIONS
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STRIPS (Separate Trading of Registered Interest and Principal of Securities) is an acronym that describes both a government bond issuance program and the securities issued by the program. STRIPS are a form of zero-coupon security (defined below) created under the U.S. Treasury’s STRIPS program.
Originally, zero-coupon securities were created by broker-dealers who bought Treasury bonds and deposited these securities with a custodian bank. The broker-dealers then sold receipts representing ownership interests in the coupons or principal portions of the bonds.
CITE: https://www.r2library.com/Resource/Title/0826102549
Some examples of zero-coupon securities sold through custodial receipt programs are CATS (Certificates of Accrual on Treasury Securities), TIGRs (Treasury Investment Growth Receipts) and generic TRs (Treasury Receipts). The U.S. Treasury subsequently introduced a program called Separate Trading of Registered Interest and Principal of Securities (STRIPS), through which it exchanges eligible securities for their component parts and then allows the component parts to trade in book-entry form.
STRIPS are direct obligations of the U.S. government and have the same credit risks as other U.S. Treasury securities. STRIPS are generally considered the most liquid (easily bought and sold) zero-coupon securities.
GOVERNMENT: https://www.treasurydirect.gov/marketable-securities/strips/
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