Financial Glossary: Strip Bonds


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Strip Bonds

Strip Bonds

The capital portion of a Bond from which the coupons have been stripped.

The Holder of the Strip Bond is entitled to its Par value at maturity, but not the annual Interest payments. A Bond where both the principal and regular Coupon payments--which have been removed--are sold separately. Also known as a "zero-Coupon Bond."

An investment firm Will usually buy a Debt instrument and "Strip" it into its separate parts. Strip bonds usually trade at a Discount and mature to Par value.

A Bond is a Debt Security, in which the authorized issuer owes the holders a Debt and is obliged to repay the principal and Interest (the Coupon) at a later date, termed maturity.

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