Separate Trading of Registered Interest and Principal of Securities (STRIPS) business definition

Treasury securities that have had their coupons and principal repayments separated into what effectively become zero-coupon Treasury bonds. The components, issued in book-entry form, carry the full backing of the U.S. Treasury. Like other zero-coupon bonds, these securities are subject to wide price fluctuations. They also subject the owner to an annual federal income tax liability even though no direct interest is paid.