I saw this paragraph in the SHV prospectus

The Underlying Index is market valueweighted based on amounts outstanding of issuances consisting of publicly issued U.S. Treasury securities that have a remaining term to final maturity of less than or equal to one year as of the rebalance date and $1 billion or more of outstanding face value, excluding amounts held by the Federal Reserve System Open Market Account. In addition, the securities in the Underlying Index must have a fixed coupon schedule and be denominated in U.S. dollars. Excluded from the Underlying Index are inflation-linked debt and zero-coupon bonds that have been stripped from coupon-paying bonds (e.g., Separate Trading of Registered Interest and Principal of Securities). However, the amounts outstanding of qualifying coupon securities in the Underlying Index are not reduced by any individual components of such securities (i.e., coupon or principal) that have been stripped after inclusion in the Underlying Index. The Underlying Index is rebalanced on the last calendar day of each month.

I don't quite understand how "stripped bonds" works. Can I still use the "normal" treasury bond prices to price the fair value of this ETF for example? How do I look up the "stripped bond" prices?

  • $\begingroup$ It would seem that Stripped Bonds (STRIPS) are excluded from this ETF according to this paragraph so you don't have to. (unfortunately it has become difficult to find STRIP prices in the public domain, they ised to be in the WSJ). $\endgroup$
    – nbbo2
    Aug 27, 2022 at 8:12
  • $\begingroup$ @nbbo2 it seems a bit ambiguous .. the later line says some bonds might be stripped after inclusion in the index? How do I find the stripped bonds on Bloomberg though? they must come with a different sedol/cusip? $\endgroup$ Aug 27, 2022 at 13:39
  • 1
    $\begingroup$ "Stripping" is, for example, when someone splits up some coupon-paying instrument into its principal-only and interest-only sub-instruments, and trades these sub-instruments separately. The prospectus seems to be saying that they ignore the information from the prices of the pieces trading separately - probably for the better. $\endgroup$ Aug 27, 2022 at 15:30


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