Gilt Strips
Certain gilts can be "stripped" into their individual cash flows, namely Interest (the periodic coupon payments) and Principal (the ultimate repayment of the investment) which can be traded separately as zero-coupon gilts, or gilt strips. For example a ten year gilt can be stripped to make 21 separate securities: 20 strips based on the coupons, which are entitled to just one of the half-yearly interest payments; and one strip entitled to the redemption payment at the end of the ten years. The title Separately Traded and Registered Interest and Principal Securities was created as a 'reverse acronym' for strips.
The UK gilt strip market started in December 1997.
Gilts can be reconstituted from all of the individual strips. By the end of 2001, there were 11 strippable gilts in issue in the UK totalling £1,800 million.
Read more about this topic: Gilt-edged Securities
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