In March 2020, the Monetary Trade Regulatory Authority (FINRA) started reporting mixture buying and selling quantity for securities issued by the U.S. Treasury Division. The general public knowledge don’t, nevertheless, embody details about the buying and selling exercise of Separate Buying and selling of Registered Curiosity and Principal of Securities (STRIPS). STRIPS are created from present Treasury securities and supply threat administration advantages, yield curve insights, and funding alternatives for a various vary of market contributors. On this submit, we offer the primary detailed evaluation of STRIPS buying and selling exercise utilizing FINRA’s Commerce Reporting and Compliance Engine (TRACE) transactions knowledge.
What are STRIPS?
STRIPS are zero-coupon securities created from the separation of money flows on a Treasury safety into the underlying coupon and principal parts. The twenty semi-annual coupon funds on a newly issued 10-year word, for instance, may be stripped (or separated) from the principal fee and each other, leading to twenty-one particular person securities. Every safety receives its personal CUSIP quantity and may be traded and registered individually, whereas remaining a direct obligation of the U.S. authorities. Securities created from the coupon funds are generally referred to as coupon STRIPS and people created from principal funds, principal STRIPS.
As STRIPS have recognized money values at a variety of particular future dates, they permit buyers to intently match their liabilities with Treasury money flows and are thus standard with liability-driven buyers, equivalent to pension funds and insurance coverage firms. The flexibleness to customise investments, and the excessive length of lengthy maturity STRIPS, additionally make them standard with speculators. As well as, the straightforward construction of STRIPS facilitates an efficient studying of the yield curve, as mentioned in “Utilizing Treasury STRIPS to Measure the Yield Curve.”
Be aware that parts of a stripped Treasury safety may be reassembled into their totally constituted type. That’s, simply as a holder of a Treasury safety can request that it’s stripped into its particular person money move parts, it might additionally collect the principal element and remaining curiosity parts of a given issued safety and request that they be reconstituted. Reconstitution could happen as a result of demand for a reconstituted safety will increase its value above that of its stripped parts.
Which Securities are Stripped?
As of the top of June 2025, $560 billion in U.S. Treasury securities had been held in stripped type, accounting for two.5 p.c of the $22.2 trillion in marketable notes, bonds, and Treasury Inflation-Protected Securities (TIPS) excellent. Be aware that payments and floating price notes are usually not eligible for stripping. Most stripped securities are lengthy maturity bonds, as proven within the chart under, reflecting demand from liability-driven buyers searching for long-duration devices. Actually, bonds account for 98.1 p.c of Treasuries held in stripped type, notes 1.9 p.c, and (TIPS) 0.002 p.c.
Most Stripped Securities are Lengthy Maturity Bonds
Notes: The chart plots the quantity of U.S. Treasury notes, bonds, and Treasury Inflation Protected Securities (TIPS) held in stripped type by safety sort and remaining years to maturity as of June 30, 2025.
The move of securities stripped by sector, proven within the subsequent chart, is very correlated with the inventory of securities which might be stripped, proven above. The chart additionally illustrates that there’s substantial reconstitution of securities from STRIPS, in order that on common, $1,827 million in Treasuries had been stripped every day from July 2024 to June 2025 and $1,567 million reconstituted.
Stripping and Reconstitution additionally Focus within the Lengthy Finish of the Curve
Notes: The chart plots the common day by day quantity of U.S. Treasury notes and bonds stripped and reconstituted from July 2024 to June 2025 by remaining years to maturity. Stripped move is first calculated for every safety and month because the end-of-month stripped quantity minus the earlier month’s end-of-month stripped quantity plus the month’s reconstitution quantity. We then sum the stripped move and reconstitution quantities throughout the 12 months in our pattern and the maturity buckets (primarily based on every safety’s remaining years to maturity in the beginning of every month) and divide by 251 buying and selling days to get the day by day averages.
The prevalence of stripped securities by sector masks appreciable variation throughout securities. As of the top of June 2025, probably the most lately issued bond within the 25-30 12 months sector was solely 7 p.c stripped, the least of any bond in that sector. In distinction, the bond maturing on Might 15, 2053 was 36 p.c stripped, probably the most of any Treasury safety. Within the 15-20 12 months sector, six bonds weren’t stripped in any respect, all of which had been initially issued as 20-year bonds.
How A lot Do STRIPS Commerce?
Every day buying and selling quantity of STRIPS averaged $5.6 billion from July 2024 to June 2025, with coupon STRIPS accounting for 32 p.c ($1,784 million) and principal STRIPS 68 p.c ($3,856 million). For comparability, Treasury notes, bonds, and TIPS traded $739 billion per day on common from July 2024 to June 2025. Per stripping exercise, buying and selling quantity of principal STRIPS is concentrated in longer maturities, as proven within the chart under. By comparability, the quantity of coupon STRIPS is extra evenly distributed. The extra even distribution of buying and selling exercise for coupon STRIPS displays the extra even distribution of coupon STRIPS excellent, because the stripping course of creates semi-annual coupon STRIPS from the current to the stripped safety’s ultimate maturity, however principal STRIPS with solely the stripped safety’s ultimate maturity.
Buying and selling Concentrates in Lengthy Maturity Principal STRIPS
Supply: Authors’ calculations, primarily based on knowledge from FINRA TRACE.
Notes: The chart plots the common day by day buying and selling quantity of STRIPS from July 2024 to June 2025 by STRIPS sort and remaining years to maturity. DTC = dealer-to-client; DTD = dealer-to-dealer; IDB = interdealer dealer.
Breaking down buying and selling exercise by venue: about 73 p.c of day by day quantity of coupon STRIPS commerce within the dealer-to-client (DTC) market (averaging $1,309 million), 19 p.c within the dealer-to-dealer (DTD; $338 million), and eight p.c by interdealer dealer (IDBs; $137 million). The volumes of principal STRIPS are much more concentrated within the DTC phase with 88 p.c of day by day quantity (averaging $3,396 million). The excessive share of DTC exercise seemingly displays the worth that end-users equivalent to pension funds and insurance coverage firms ascribe to those single-payment securities.
The coupon vs. principal STRIPS exercise hole can also be obvious in common commerce measurement, as proven within the desk under. Coupon STRIPS commerce with a mean measurement of about $850 thousand, whereas principal STRIPS commerce with a mean commerce measurement of about $7 million. Commerce sizes are additionally bigger within the DTC market, and particularly for principal STRIPS.
Commerce Sizes are Bigger for Principal STRIPS and within the Supplier-to-Shopper Market
| DTC | DTD | IDB | All | |
| Coupon STRIPS | 1.42 | 0.42 | 0.36 | 0.85 |
| Principal STRIPS | 10.47 | 2.57 | 1.09 | 7.26 |
Notes: The desk experiences the common commerce measurement of STRIPS from July 2024 to June 2025 by STRIPS sort and buying and selling venue in thousands and thousands of U.S. {dollars}. Averages are first calculated for every day, STRIPS sort, and venue after which averaged throughout days. DTC = dealer-to-client; DTD = dealer-to-dealer; IDB = interdealer dealer.
Longer maturity STRIPS additionally commerce with a lot bigger commerce sizes and that is very true for principal STRIPS, as proven within the subsequent chart. Commerce sizes within the 25-30 12 months sector are thus about 4 instances bigger than these within the 10-15 12 months sector for principal STRIPS ($12.3 million vs. $2.8 million), however solely about 2.5 instances as giant for coupon STRIPS ($2.5 million vs. $1.0 million).
Commerce Sizes are Bigger for Longer Maturity STRIPS
Notes: The chart plots the common commerce measurement of STRIPS from July 2024 to June 2025 by STRIPS sort and remaining years to maturity. Averages are first calculated for every day, STRIPS sort, and maturity bucket after which averaged throughout days.
Lastly, we discover buying and selling frequency within the chart under. Curiously, the 0-5 12 months maturity bucket is most incessantly traded, with roughly the identical variety of DTC and DTD trades every buying and selling day. Because the securities’ maturities lengthen, the common day by day variety of trades typically decreases for coupon STRIPS. Nonetheless, for principal STRIPS the common day by day variety of trades first decreases however then will increase as securities’ maturities lengthen past 10-15 years.
STRIPS Commerce Often within the 0-5 12 months Sector
Supply: Authors’ calculations, primarily based on knowledge from FINRA TRACE.
Notes: The chart plots the common day by day buying and selling frequency of STRIPS from July 2024 to June 2025 by STRIPS sort and remaining years to maturity. DTC = dealer-to-client; DTD = dealer-to-dealer; IDB = interdealer dealer.
Summing Up
Our preliminary evaluation exhibits that buying and selling exercise concentrates in long-maturity principal STRIPS, aligning with the preferences of liability-driven buyers equivalent to pension funds and insurance coverage firms for long-duration devices. Principal STRIPS additionally are inclined to commerce with larger costs than coupon STRIPS of the identical maturity (as proven in “Utilizing Treasury STRIPS to Measure the Yield Curve,” for instance). An fascinating space for future evaluation is the extent to which the upper buying and selling quantity of principal STRIPS is related to larger liquidity and whether or not liquidity variations within the STRIPS market might help clarify the pricing variations.
Michael J. Fleming is head of Capital Markets within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.
Or Shachar is a monetary analysis advisor within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.
Find out how to cite this submit:
Michael J. Fleming and Or Shachar, “Stripping STRIPs Buying and selling Exercise,” Federal Reserve Financial institution of New York Liberty Avenue Economics, August 10, 2026, https://doi.org/10.59576/lse.20260810
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Disclaimer
The views expressed on this submit are these of the creator(s) and don’t essentially mirror the place of the Federal Reserve Financial institution of New York or the Federal Reserve System. Any errors or omissions are the duty of the creator(s).
