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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35498  
Subject: Re: Treasury Zero-Percent Cert of Indebtedness ? Date: 2/27/2005 2:18 PM
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Author: pauleckler | Date: 2/27/05 11:30 AM | Number: 11939
Treasure derivatives called strips and tints have been available for years.


I think that Certificates of Indebtedness are nothing more than official IOU's.

In the past, Certificates of Indebtedness were used mainly by banks and currency traders to assure a reserve of cash to back notes and coins that were being issued. They sometimes (usually?) paid a very small coupon like a note.

But, this seems to be a new use, and I don't think there is any coupon at all. I think you place money in your C of I account at the Treasury, to be used to purchase traditional Treasury instruments (bills, bonds, etc) at a later time. It's sort of an escrow account for holding funds to make these purchases.

I think it helps the government expedite settling of the multitude of sales at an auction.

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