Zero Sector of Treasuries Market Gets Big Boost From Oil Plunge
Strips are best performers in July
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An obscure section of the $12.7 trillion Treasury universe is beating the rest of the market this month as sinking oil prices lured buyers convinced inflation is nowhere on the horizon.
The securities, dubbed Strips, are created when banks separate the interest payments from the principal of U.S. debt and sell each at a discount. Principal Strips, essentially zero-coupon Treasuries, are the most vulnerable to inflation of U.S. government bonds. Thirty-year maturities have returned 5.5 percent in July, while regular 30-year Treasuries earned 3.3 percent and the broader market gained 0.7 percent, Bank of America Merrill Lynch data show.