Institutional - STRIPS - amortization of a treasury strip


Interest Only (IO) Strips Definition amortization of a treasury strip

Interest only (IO) strips are the interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments. The periodic.

Jul 06, 2019 · Treasury STRIPS are fixed-income securities sold at a significant discount to face value and offer no interest payments because they mature at par. .

For example, a Treasury note with 10 years remaining to maturity consists of a single principal payment, due at maturity, and 20 interest payments, one every six months over a 10 year duration. When this note is converted to STRIPS form, each of the 20 interest payments and the principal payment becomes a separate security.

Amortization and accretion Amortization, when used to calculate the yield at any given time of a fixed-income investment bought at a premium, is the writing off of the investment’s premium over its projected life until maturity. Accretion is the accumulation of paper value on a discounted fixed-income investment until it reaches maturity.