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seen Apr 4 '13 at 13:44

Nov
23
comment Why is there a price difference between 30 year principal and interest STRIPS?
well it is a global market, I guess, so there is probably some effect there. That was one of my first thoughts. IE principal payments would thus be more desired, but I don't think the difference is large enough for that to be the main factor.
Nov
18
comment Why is there a price difference between 30 year principal and interest STRIPS?
Great answer I really appreciate this. I have two followups if you don't mind. 1.) If interest rates go up would you expect the arb to shrink as the available pool of securities would move closer to equal size? 2.) As a (very small) individual investor buying either would be equivalent as long as I held the position long enough for any swings in the arb to neutralize? (So I would always buy the cheaper bond on the off chance that it was held to maturity.)
Nov
11
comment Why is there a price difference between 30 year principal and interest STRIPS?
Thank you for the cleanup! Well I did find one example where the interest payment was trading for more than the principal payment so this all could be noise. (Although I thought noise like this was arb'ed out....) I should add that I am just looking at schwab online's trading platform, it could just be a function of their trading desk I suppose. It would be interesting if someone with more professional tools saw something similar.
Nov
10
comment Why is there a price difference between 30 year principal and interest STRIPS?
so I looked today and I found that consistently (4 samples between maturity dates of 1/2040 and 2/2041) the principal payment was worth a full 1% more than the interest payment. I am inclined to believe this has something to do with repayment risk as the margin seems to have widened from yesterday.