The Full Form of STRIPS is Separate Trading of Registered Interest and Principal Securities.

STRIPS is the acronym for Separate Trading of Registered Interest and Principal of Securities. STRIPS let investors hold and trade the individual interest and principal components of eligible Treasury notes, bonds, and TIPS as separate securities.

STRIPS are popular with investors who want to receive a known payment on a specific future date. STRIPS are called “zero-coupon” securities since the only time an investor receives a payment from STRIPS is at maturity. STRIPS can be purchased and held only through financial institutions and government securities brokers and dealers. The market can trade separate principal and interest components, each of which is a zero-coupon instrument, in book-entry form as direct obligations of the United States.

In 1985, the STRIPS program was initiated for new Treasury securities that mature in 10 years or over and are maintained in the Federal Reserve book-entry system. Treasury does not directly auction or issue STRIPS to investors. Instead, fully-constituted securities must be converted to STRIPS by the Federal Reserve. STRIPS can be reconstituted back into fully-constituted Treasury securities.