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- Publisher
- Emerald Publishing
- Copyright
- Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
- ISSN
- 0307-4358
- DOI
- 10.1108/MF-08-2013-0217
- Publisher site
- See Article on Publisher Site
Abstract
Purpose – Coupon and principal Separate Trading of Registered Interest and Principal Securities (STRIPS) maturing at the same date often trade at different yields. The paper aims to discuss this issue. Design/methodology/approach – This paper analyzes for the first time the maturity structure of these differences for the US Treasury STRIPS market. Findings – The paper surprisingly finds that short‐term coupon STRIPS persistently trade at lower yields whereas long‐term coupon STRIPS trade at higher yields compared to matched‐maturity principal STRIPS. Originality/value – An integrated analysis of Treasury STRIPS and the underlying notes market allows us to isolate two determinants: first, properties of the underlying notes that spill over to principal STRIPS, and second, the liquidity of coupon STRIPS measured by stripping activity and stripping volume.
Journal
Managerial Finance – Emerald Publishing
Published: Mar 4, 2014
Keywords: Financial crisis; US treasury STRIPS; Bond liquidity; Market integration