S&P500 vs Principal Strip
There are investors who have huge exposure in equities and worried that equities may fall.
They may want to consider buying principal strip.
You can see from the attached chart, S&P500 and principal strip move inversely during 2008/2009 marked by the circle.
Even when S&P500 continues to rise, principal strip rises as well.
This is because principal strip trades at deep discount to par as it does not pay coupons. It will matures at 100 at maturity if there is no default.
Issuer for Principal Strip is US Government.
They may want to consider buying principal strip.
You can see from the attached chart, S&P500 and principal strip move inversely during 2008/2009 marked by the circle.
Even when S&P500 continues to rise, principal strip rises as well.
This is because principal strip trades at deep discount to par as it does not pay coupons. It will matures at 100 at maturity if there is no default.
Issuer for Principal Strip is US Government.
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