: They can be used to build "bond ladders," where different strips mature at regular intervals to provide steady cash flow.
: Investors use STRIPS to match the maturity date exactly with a future financial obligation. matures strips
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: A standard bond is "stripped" into its principal repayment and its individual interest (coupon) payments. they carry minimal default risk
: Each resulting strip becomes a zero-coupon bond , meaning it does not pay periodic interest but is instead sold at a deep discount to its face value.
: Because they are backed by the U.S. Treasury, they carry minimal default risk, though they are highly sensitive to interest rate changes before they mature.