Daily trading volume of Treasury STRIPS averaged $5.6 billion from July 2024 to June 2025, with principal STRIPS accounting for 68 percent of activity, according to a new analysis published August 10, 2026 by the Federal Reserve Bank of New York. The report, authored by Michael J. Fleming and Or Shachar, offers the first detailed examination of trading activity in these zero-coupon securities, which are created by separating the interest and principal payments of regular Treasury bonds and notes into individual tradable components. As of June 2025, $560 billion in U.S. Treasury securities were held in stripped form, representing 2.5 percent of the $22.2 trillion in marketable notes, bonds, and inflation-protected securities outstanding.
Trading concentrates heavily in long-maturity principal STRIPS, the analysis shows. Bonds account for 98.1 percent of Treasuries held in stripped form, while notes represent just 1.9 percent and inflation-protected securities a mere 0.002 percent. Principal STRIPS—securities created from the final payment of a bond—generated $3,856 million in average daily volume, compared to $1,784 million for coupon STRIPS, which come from the semi-annual interest payments. About 88 percent of principal STRIPS trading occurs in the dealer-to-client market, where pension funds and insurance companies typically buy these instruments to match long-term liabilities. Average trade sizes differ sharply between the two types: principal STRIPS change hands in $7 million blocks on average, while coupon STRIPS trade at roughly $850,000 per transaction. In the 25-30 year maturity range, principal STRIPS trade sizes reach $12.3 million, about four times larger than the $2.8 million average for 10-15 year maturities.
The report finds that substantial reconstitution activity runs alongside stripping, with an average of $1,827 million in Treasuries stripped each day from July 2024 to June 2025 and $1,567 million reassembled back into their original form. Reconstitution happens when demand pushes the price of a fully constituted security above the combined value of its separated components, according to the authors. Variation across individual securities is considerable: the bond maturing May 15, 2053 was 36 percent stripped as of June 2025—the highest proportion of any Treasury security—while the most recently issued bond in the 25-30 year sector was only 7 percent stripped, the lowest in that maturity range. Six bonds in the 15-20 year sector weren't stripped at all, all of which were originally issued as 20-year bonds.
The concentration of trading in long-maturity principal STRIPS aligns with the preferences of liability-driven investors such as pension funds and insurance companies seeking long-duration instruments, the analysis explains. These single-payment securities allow investors to precisely match future cash flows with specific liabilities, making them especially valuable for institutions with predictable long-term obligations. The high share of dealer-to-client activity—73 percent for coupon STRIPS and 88 percent for principal STRIPS—likely reflects the value that end-users place on these products. Trading frequency patterns reveal another dimension: the 0-5 year maturity bucket sees the most trades, but for principal STRIPS, daily trade counts decrease in the 5-15 year range before rising again for securities with more than 15 years remaining.
The authors identify an interesting avenue for future research: whether the higher trading volume of principal STRIPS translates into greater liquidity, and if liquidity differences help explain why principal STRIPS tend to carry higher prices than coupon STRIPS of the same maturity. The preliminary analysis establishes baseline patterns that can inform deeper investigation into how market structure affects pricing in this $560 billion segment of the Treasury market. For institutions managing long-term liabilities, understanding these trading dynamics matters as much as the instruments themselves.