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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: zero coupon Treasury bonds Date: 4/15/1998 8:38 AM
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Greetings, Fiddlerjoe, and welcome.

<<What are the pros and cons of zero coupon U.S. Treasury bonds? Are they as liquid in the secondary market as regular long term Treasury bonds?>>

Zeroes are backed by the full faith and credit of the US and their earnings are free of State income taxes. They are readily marketable in the secondary market. Like any bond, they are subject to interest rate changes, so there is a risk on principal if you sell prior to maturity. Although it doesn't pay annual interest, you must declare the imputed interest annually from the date of purchase through maturity, and the federal taxman will tax you on that growth even though you haven't seen the cash. They're great for safety through maturity, but not all that hot for growth.

Regards….Pixy

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