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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35271  
Subject: Re: Treasury Zero-Percent Cert of Indebtedness ? Date: 2/27/2005 11:30 AM
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Treasure derivatives called strips and tints have been available for years. The strips are zero coupon bonds based on treasureies but offered by a third party. The tints are the current interest income portion.

For those who do not need the income now but plan to reinvest their dividends zeros offer several advantages. One is that you get compound interest at the purchase rate for the life of the investment, rather than reinvesting dividends at the then current rates. A second advantage is that zeros make very little paperwork so less accounting is required for the institution that would receive the payments--presumably your broker or account custodian.

I was not aware that treasury was now offering their own zeros, but the popularity of strips makes it sound like a reasonable service. I presume that the third parties who owned the treasuries and prepared and marketed the strips and tints had some expenses. Treasury should be able to do this for lower fees, a better deal for everyone.
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