Treasury STRIPS (T-STRIPS) stands for Separate Trading of Registered Interest and Principal of Securities. It is a type of debt security issued by the United States Department of the Treasury that separates the interest and principal payments of a Treasury bond into separate securities. T-STRIPS are created by the Treasury Department or authorized financial institutions by separating the interest and principal components of eligible Treasury securities, and then selling them as individual securities.Investors can buy T-STRIPS just like any other Treasury security, through TreasuryDirect, a bank or broker. T-STRIPS have no credit risk because they are backed by the full faith and credit of the U.S. government and are considered to be virtually risk-free. The main risk associated with T-STRIPS is the risk of inflation, which can erode the purchasing power of the interest earned on the investment.T-STRIPS are considered to be a good investment option for those looking for a safe, long-term investment with a relatively stable and predictable return. They can be used as a diversification tool in a portfolio, or as a hedge against inflation. However, T-STRIPS are not considered to be a liquid investment, as they cannot be easily sold before maturity. Additionally, the longer the maturity of a bond, the greater the interest rate risk.In summary, Treasury STRIPS (T-STRIPS) is a type of debt security issued by the United States Department of the Treasury that separates the interest and principal payments of a Treasury bond into separate securities.
