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Treasury Strips, coupons vs principal
Why would the yield to maturity on a treasury strip be different for a "Principal" strip vs. a "Coupon" strip?It would seem to me that these are basically a USD cashflows for a certain value date, same credit risk (US govt), etc. Thanks!
Last edited by rickynu on October 12th, 2010, 10:00 pm, edited 1 time in total.
Treasury Strips, coupons vs principal
Is there a difference in taxation? eg if everyone had to pay income tax on the coupons, but everyone got the capital tax free?
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- Martinghoul
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Treasury Strips, coupons vs principal
If memory serves, it's about fungibility of one set and non-fungibility of the other, which makes them behave very differently in repo. I'm pretty sure that's all there is to it.
Last edited by Martinghoul on October 13th, 2010, 10:00 pm, edited 1 time in total.
Treasury Strips, coupons vs principal
yes - suspected it had to do with the ability to short the "Principals" and ability to repo....
Treasury Strips, coupons vs principal
Anyone have any good reading suggestions for quantifying the yield difference based on fungibility ?