Separate Trading of Registered Interest and Principal of Securities (STRIPS)
You can buy, hold, sell, and redeem STRIPS only through a financial institution, a broker, or a dealer who handles government securities.
Treasury securities with a fixed principal, such as notes, bonds, and TIPS, are eligible and may be stripped. Bills and FRNs can't be stripped.
The idea of STRIPS is that the principal and each interest payment become separate securities that are treated individually. Each separated piece is a zero-coupon security that matures separately and has only one payment.
An example
A bond with 10 years remaining to maturity consists of a single principal payment due at maturity, and twenty interest payments, one every six months over the next 10 years.
When the bond is stripped, the principal payment and each of the 20 interest payments becomes a separate security. The one original security is now 21 separate new securities with unique CUSIPs. All new security pieces pay at maturity.
STRIPS par value must be in multiples of $100
The minimum face amount needed to STRIP is $100, and any par amount above that minimum must be a multiple of $100.
A stripped security may also be reassembled
A stripped security may be reassembled into a single security if the financial institution, broker, or dealer gets all the remaining separate pieces of the original security. When reassembled, it will again have a single CUSIP number.