The Stripping of U.S. Treasury Securities

Salomon Brothers Monograph Series and Finance and Economics, Monograph 1989-1

73 Pages Posted: 4 Apr 2017

See all articles by Miles Livingston

Miles Livingston

University of Florida - Department of Finance, Insurance and Real Estate

Deborah Gregory

Bentley University - Department of Finance

Date Written: March 29, 2017

Abstract

This monograph traces the early development of the U.S. Treasury strips market. The stripping of U.S. Treasury securities began in 1982 as a private market. In 1985, the U.S. Treasury began to allow dealers to strip Treasury securities and in 1987 the Treasury permitted reconstitution of strips into the underlying bonds. The taxation of Treasury bonds and strips is examined. Except in the case of a flat after-tax term structure of interest rates, the after-tax value of a bond is shown to be different from the after-tax value of a portfolio of strips with the same pretax future cash inflows.

Keywords: STRIPS, Taxation

JEL Classification: G12, G23

Suggested Citation

Livingston, Miles B. and Gregory, Deborah, The Stripping of U.S. Treasury Securities (March 29, 2017). Salomon Brothers Monograph Series and Finance and Economics, Monograph 1989-1, Available at SSRN: https://ssrn.com/abstract=2942851

Miles B. Livingston (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainsville, FL 32611-7168
United States
352-392-4316 (Phone)
352-392-0301 (Fax)

Deborah Gregory

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States

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