STRIPS (Separate Trading of Registered Interest and Principal of Securities)
- A Federal Reserve system permitting independent trading and ownership of principal and coupon portions of certain Treasury securities, enabling the creation of zero coupon Treasury securities from specific whole bonds
- Given the low risk profile and easy convertibility, the STRIPS system draws heavy institutional investment.
- The bank used STRIPS to separately sell the interest and principal elements of Treasury securities.
- The STRIPS mechanism allowed them to align their risk profile with zero coupon Treasury securities.