Can someone please explain what exactly this means? I was thinking till now, that the US Treasury does issue zero-coupon bonds. Got completely confused after reading the note below: “Since the U.S. Treasury does not issue zero coupon bonds, investment bankers began stripping the coupons from Treasuries to create zero-coupon securities of various maturities to meet investor demand. In 1985, the Treasury introduced Separate Trading of Registered Interest and Principal Securities (STRIPS) program. Under this program, the Treasury issues coupon-bearing notes and bonds as it normally does, but then it allows certain government securities dealers to buy large amounts of these issues, strip the coupons from the principal, repackage the cash flows, and sell them separately as zero-coupon bonds, at discounts to par value”.
The Treasury does not issue zeroes, they do issue discount t-bills that do not have a coupon, is that what you are thinking of? They are issued at a discount to par.
It seems pretty clear. The Treasury doesn’t actually sell zeros, but if you buy a Treasury you can electronically exchange it for separable coupons and principal. From a normal investor’s point of view, that’s pretty much the same as you are not buying Treasuries at auction anyway.
amberpower Wrote: ------------------------------------------------------- > The Treasury does not issue zeroes, they do issue > discount t-bills that do not have a coupon, is > that what you are thinking of? They are issued at > a discount to par. STRIPS are about as close to the govt issuing zeros as you can get without actually selling them at auction.
Got it… thank you all! So the zero-coupon bonds are generally issued by??
Big banks.
Thanks Joey!