Contents of stripped bonds
2. The separation of principal and interest from government bonds leads to the creation of two groups of bonds: one is the interest payment every six months; the other is the final principal payment.
3. Each part of the principal-and-interest-separated Treasury bond is often called a "zero-coupon Treasury bond" because investors who invest in each portion of the Treasury bond can only receive a one-time payment ( For example, the coupon income in the third half year). Investors (such as life insurance companies) who hope to receive a lump sum in the distant future will choose to hold the principal portion of the debt.
4. Which investors are willing to buy bonds with separation of principal and interest?
(1) Lottery companies run by some states will invest existing funds prepared to pay grand prizes in principal-and-interest-separated treasury bonds to ensure that the annual prizes they deserve can be paid to lottery winners.
(2) Pension funds also purchase principal and interest-separated treasury bonds, with the purpose of ensuring that the cash flow generated by their assets (principal-and-interest-separated treasury bonds) can be consistent with the cash flow required by their liabilities (pension payments). match.