What is Strips Bonds? - QS Study
QS Study

STRIPS is the acronym for Separate Trading of Registered Interest and Principal of Securities. These securities have existed in international bond markets for some years.

“Stripping” involves separating a plain vanilla bond into its constituent interest (coupon) payments (often called C-strips) and the principal payment (often called the P-strip), such that they exist separately.

The way bonds are stripped is straightforward: the plain vanilla bond is placed in a special purpose vehicle (SPV) and the SPV in turn issues the various “stripped” bonds (C-strips and the P-strip), with the bond providing collateral security. Bonds may also be stripped by the issuer itself: the bond (or part of the issue) is cancelled and a series of C-strips and P-strips are issued in place thereof.