In March 2020, the Monetary Business Regulatory Authority (FINRA) started reporting combination buying and selling quantity for securities issued by the U.S. Treasury Division. The general public knowledge don’t, nevertheless, embrace details about the buying and selling exercise of Separate Buying and selling of Registered Curiosity and Principal of Securities (STRIPS). STRIPS are created from current Treasury securities and provide danger administration advantages, yield curve insights, and funding alternatives for a various vary of market individuals. 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 notice, for instance, may be stripped (or separated) from the principal cost 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 identified money values at a variety of particular future dates, they permit buyers to intently match their liabilities with Treasury money flows and are thus common with liability-driven buyers, resembling pension funds and insurance coverage firms. The flexibleness to customise investments, and the excessive period of lengthy maturity STRIPS, additionally make them common with speculators. As well as, the easy construction of STRIPS facilitates an efficient studying of the yield curve, as mentioned in “Utilizing Treasury STRIPS to Measure the Yield Curve.”
Word 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 or not it’s stripped into its particular person money stream parts, it might probably additionally collect the principal element and remaining curiosity parts of a given issued safety and request that they be reconstituted. Reconstitution might happen as a result of demand for a reconstituted safety will increase its worth above that of its stripped parts.
Which Securities are Stripped?
As of the top of June 2025, $560 billion in U.S. Treasury securities have been held in stripped type, accounting for two.5 % of the $22.2 trillion in marketable notes, bonds, and Treasury Inflation-Protected Securities (TIPS) excellent. Word that payments and floating price notes should not eligible for stripping. Most stripped securities are lengthy maturity bonds, as proven within the chart beneath, reflecting demand from liability-driven buyers looking for long-duration devices. In actual fact, bonds account for 98.1 % of Treasuries held in stripped type, notes 1.9 %, and (TIPS) 0.002 %.
Most Stripped Securities are Lengthy Maturity Bonds
Supply: Authors’ calculations, primarily based on knowledge from the Treasury Division’s Month-to-month Assertion of the Public Debt.
Notes: The chart plots the quantity of U.S. Treasury notes, bonds, and Treasury Inflation Protected Securities (TIPS) held in stripped type by safety kind and remaining years to maturity as of June 30, 2025.
The stream of securities stripped by sector, proven within the subsequent chart, is very correlated with the inventory of securities which are 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 have 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
Supply: Authors’ calculations, primarily based on knowledge from the Treasury Division’s Month-to-month Assertion of the Public Debt.
Notes: The chart plots the typical every day quantity of U.S. Treasury notes and bonds stripped and reconstituted from July 2024 to June 2025 by remaining years to maturity. Stripped stream 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 stream and reconstitution quantities throughout the 12 months in our pattern and the maturity buckets (primarily based on every safety’s remaining years to maturity firstly of every month) and divide by 251 buying and selling days to get the every day averages.
The prevalence of stripped securities by sector masks appreciable variation throughout securities. As of the top of June 2025, probably the most just lately issued bond within the 25-30 yr sector was solely 7 % stripped, the least of any bond in that sector. In distinction, the bond maturing on Could 15, 2053 was 36 % stripped, probably the most of any Treasury safety. Within the 15-20 yr sector, six bonds weren’t stripped in any respect, all of which have 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 % ($1,784 million) and principal STRIPS 68 % ($3,856 million). For comparability, Treasury notes, bonds, and TIPS traded $739 billion per day on common from July 2024 to June 2025. In keeping with stripping exercise, buying and selling quantity of principal STRIPS is concentrated in longer maturities, as proven within the chart beneath. 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 last maturity, however principal STRIPS with solely the stripped safety’s last 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 typical every day buying and selling quantity of STRIPS from July 2024 to June 2025 by STRIPS kind 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 % of every day quantity of coupon STRIPS commerce within the dealer-to-client (DTC) market (averaging $1,309 million), 19 % within the dealer-to-dealer (DTD; $338 million), and eight % via interdealer dealer (IDBs; $137 million). The volumes of principal STRIPS are much more concentrated within the DTC section with 88 % of every day quantity (averaging $3,396 million). The excessive share of DTC exercise doubtless displays the worth that end-users resembling pension funds and insurance coverage firms ascribe to those single-payment securities.
The coupon vs. principal STRIPS exercise hole can be obvious in common commerce dimension, as proven within the desk beneath. Coupon STRIPS commerce with a median dimension of about $850 thousand, whereas principal STRIPS commerce with a median commerce dimension 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 Vendor-to-Consumer Market
DTCDTDIDBAllCoupon STRIPS1.420.420.360.85Principal STRIPS10.472.571.097.26Source: Authors’ calculations, primarily based on knowledge from FINRA TRACE.
Notes: The desk studies the typical commerce dimension of STRIPS from July 2024 to June 2025 by STRIPS kind and buying and selling venue in tens of millions of U.S. {dollars}. Averages are first calculated for every day, STRIPS kind, 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 yr sector are thus about 4 instances bigger than these within the 10-15 yr sector for principal STRIPS ($12.3 million vs. $2.8 million), however solely about 2.5 instances as massive for coupon STRIPS ($2.5 million vs. $1.0 million).
Commerce Sizes are Bigger for Longer Maturity STRIPS
Supply: Authors’ calculations, primarily based on knowledge from FINRA TRACE.
Notes: The chart plots the typical commerce dimension of STRIPS from July 2024 to June 2025 by STRIPS kind and remaining years to maturity. Averages are first calculated for every day, STRIPS kind, and maturity bucket after which averaged throughout days.
Lastly, we discover buying and selling frequency within the chart beneath. Apparently, the 0-5 yr maturity bucket is most continuously traded, with roughly the identical variety of DTC and DTD trades every buying and selling day. Because the securities’ maturities lengthen, the typical every day variety of trades typically decreases for coupon STRIPS. Nonetheless, for principal STRIPS the typical every day variety of trades first decreases however then will increase as securities’ maturities lengthen past 10-15 years.
STRIPS Commerce Continuously within the 0-5 Yr Sector
Supply: Authors’ calculations, primarily based on knowledge from FINRA TRACE.
Notes: The chart plots the typical every day buying and selling frequency of STRIPS from July 2024 to June 2025 by STRIPS kind 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 resembling pension funds and insurance coverage firms for long-duration devices. Principal STRIPS additionally are likely to commerce with increased costs than coupon STRIPS of the identical maturity (as proven in “Utilizing Treasury STRIPS to Measure the Yield Curve,” for instance). An attention-grabbing space for future evaluation is the extent to which the upper buying and selling quantity of principal STRIPS is related to increased liquidity and whether or not liquidity variations within the STRIPS market will 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.
The way to cite this submit:
Michael J. Fleming and Or Shachar, “Stripping STRIPs Buying and selling Exercise,” Federal Reserve Financial institution of New York Liberty Road Economics, August 10, 2026, https://doi.org/10.59576/lse.20260810
BibTeX: View | Obtain
@article{FlemingShachar2026,
writer={Fleming, Michael J. and Shachar, Or},
title={Stripping STRIPs Buying and selling Exercise},
journal={Liberty Road Economics},
notice={Liberty Road Economics Weblog},
quantity={August 10},
yr={2026},
url={https://doi.org/10.59576/lse.20260810}
}
Disclaimer
The views expressed on this submit are these of the writer(s) and don’t essentially replicate the place of the Federal Reserve Financial institution of New York or the Federal Reserve System. Any errors or omissions are the accountability of the writer(s).
