STRIPS
STRIPS is an acronym from Separate Trading Of Registered Interest and Principal of Securities. These are treasury debt securities, the main debt of which is traded separately from interest payments (coupons). There are both STRIPS for primary debt and coupons; that is, investors can choose the type that interests them.
STRIPS are available in the form of discount bonds, so the coupon payments are not produced by bonds. For example, we can refer to the example of STRIPS on the UK national debt. By links, you can find
Principal STRIPS and one of the
Coupon STRIPS bonds of the
United Kingdom, Stock 6 7dec2028, GB0002404191.
Advantages of STRIPS
- Have a wide range of maturity;
- Are popular among retail investors due to the size of lots;
- Credit risk is comparable to the risk of sovereign issues; that is, they can be called quite reliable;
Disadvantages of STRIPS
- STRIPS have less liquidity in comparison with treasury bonds.
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