Cryptocurrency Q&A
What are the risks of treasury strips?
What are the risks of treasury strips?
KimonoElegance
Tue Jul 30 2024
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7 answers
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Can you please elaborate on the potential risks associated with investing in treasury strips? As an investor, I'm keen to understand the downsides of this type of investment, such as liquidity risks, interest rate risks, and credit risks. Additionally, how do treasury strips compare to other types of fixed-income securities in terms of risk? Are there any specific market conditions that can significantly impact the performance of treasury strips? Thank you for your insights.
7 answers
GyeongjuGrace
Thu Aug 01 2024
Conversely, when interest rates decline, the prices of bonds, including STRIPS, appreciate as they become more attractive to investors seeking relatively higher yields.
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Carlo
Thu Aug 01 2024
STRIPS, specifically, exhibit heightened sensitivity to fluctuations in interest rates due to their unique structure. Unlike conventional bonds, STRIPS do not offer periodic interest payments that can act as a cushion against price declines.
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Giuseppe
Thu Aug 01 2024
Treasury STRIPS, as financial instruments akin to bonds, inherently confront the challenge of interest rate risk. This phenomenon stems from the inverse correlation between interest rates and bond prices.
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KimonoGlory
Thu Aug 01 2024
The absence of these semi-annual interest payments means that STRIPS holders are solely reliant on the final principal repayment at maturity to realize their investment returns.
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SunlitMystery
Thu Aug 01 2024
When the market experiences an increase in interest rates, investors tend to favor newly issued bonds with higher yields, leading to a decline in the prices of existing bonds, including STRIPS.
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