U.S. Treasury STRIPS Activity Drops 90% in July, According to Reuters

NEW YORK (Reuters) – The separation of interest and principal components of U.S. Treasury securities on Wall Street totaled $707 million in July, a significant decline of over 90 percent from $7.544 billion in June, based on data released by the Treasury Department.

Bond dealers disassemble, or "strip," these components for resale to investors who prefer to receive a predetermined payment on a specific future date. These instruments, known as "Separate Trading of Registered Interest and Principal of Securities" (STRIPS) or zero-coupon securities, provide returns only at maturity.

In July, the stripping of longer-dated Treasuries amounted to $599 million, down from $6.7 billion in June, which had marked the highest level for these maturities since February 2013 due to strong global demand for longer-term U.S. bonds.

Overall, total STRIPS outstanding decreased by $427 million in July, with $1.13 billion of them being retired, according to Treasury data.