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Treasury Strips, coupons vs principal
Posted: October 13th, 2010, 7:00 pm
by rickynu
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!
Treasury Strips, coupons vs principal
Posted: October 14th, 2010, 9:44 am
by MHill
Is there a difference in taxation? eg if everyone had to pay income tax on the coupons, but everyone got the capital tax free?
Treasury Strips, coupons vs principal
Posted: October 14th, 2010, 11:26 am
by Martinghoul
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.
Treasury Strips, coupons vs principal
Posted: October 14th, 2010, 11:47 am
by rickynu
yes - suspected it had to do with the ability to short the "Principals" and ability to repo....
Treasury Strips, coupons vs principal
Posted: October 14th, 2010, 1:07 pm
by Hansi
Anyone have any good reading suggestions for quantifying the yield difference based on fungibility ?