Strip Bonds Information Centre

Strip Bonds - An Overview

Strip bonds are now available in at least 16 countries around the world, including the U.S., Japan, the United Kingdom, France, Germany, and Canada. Others are working on or considering such services.

By some measures, strip bonds are the most popular in Canada. In June 2003, Canada had more than double the face value of stripped underlying bonds per capita than any other country. This is only a rough measure of the relative popularity of strip bonds, but gives you an idea of the relative size of the market. This may be related to investor preferences but also could be partially due to the expanded functionality available in Canada. Obviously, the comparatively high fees for the Canadian service have not reduced the demand significantly.

Canada most advanced in strip bonds

Canada also has benefited from having the most advanced functionality in strip bonds, as the pricing of bonds now is more closely related to the cash flow yields than in other markets such as the U.S.

Consequently, Canada has by far the most strip bond issues (over 4,000), the most underlying bonds (over 400), and the strip bonds with the longest term to maturity (93 years - down from a previous record of 99 years). Canada also is the only market that supports the integration of the T-bill and strip bond markets. T-bills can be stripped (for very legitimate reasons) and strip bonds can be transformed into additional supply of T-bills.

Focus on how strip bonds work

Over the past several years, I have found several sites that contain some information about strip bonds, but most focus only on reasons to buy them, current market conditions without giving much additional information on the risks, how they work, and the different forms available. Also, even some of the public information seemed incomplete to me, particularly with respect to the risks involved.

For this site, I have attempted to compile as much information as I could on the subject of strip bonds (excluding current market conditions), with the objective of providing reasonably comprehensive and reliable information for educated investors. The information has been compiled from public sources (using the links that you can access from the links page), augmented by extensive professional experience in working on the development of the Canadian strip bond services from 1986 to 2002.

Strip bonds terminology glossary

Because the terminology related to strip bonds is often used inconsistently, and to assist novice investors, I have also prepared a glossary of the technical terms used on this site.

Canadian interest and market in strip bonds disproportionately large

A quick search on the GoogleTM search engine for the term strip bonds shows an overwhelming number of Canadian references, even though the Canadian strip bond market represents less than 20% of the world-wide total. On June 3, 2006, 13 of the first 20 (and 38 of the top 50) results were Canadian sites. Similarly, for the terms "stripped bonds", more than half the results were Canadian sites.

In Canada, the market for strip bonds has grown to the point that the current market value of outstanding strip bonds in Canada exceeds $100 billion (CAD). This is approximately 40% of the Canadian market size for bank-issued GICs (Guaranteed Investment Certificates), which are often viewed as comparable products.

In the U.S., the market value of the outstanding strip bonds is roughly 4 times the size of the Canadian market, which is much lower than the normal relative size of the U.S. financial markets (usually over 10 times as large). In other countries, the market for strip bonds is evolving at different rates. The most active markets (other than Canada and the U.S.) are in France and Spain, based solely on the reported amounts that have been stripped.

Select a topic from the menu at the top of this page, or continue by selecting:

  |   Next  Next

Recent updates:

NOTES:

  1. If you are interested in these products as investments, please consult a registered sales representative in your area.
  2. Information on the strip bond services is subject to change without notice. Check the links provided for the most current information on each market.
  3. This site is designed to work best with Internet Explorer 6/7, Firefox 1/2, and Netscape 7/8.

Google
Web stripbonds.info

Copyright Keith Campbell © 2002-2008. All rights reserved.

www.financialwebring.com