Investing - Theory, News & General • Re: What's up (or down) with US Treasuries?

Questions from another thread:

So would be super simple to build a longer-term nominal T ladder using STRIPS, with each STRIPS delivering the desired nominal cash flow at maturity.

Coupon notes and bonds could be used, and then maybe a ladder building tool would be useful. Playing with the Fidelity ladder builder tool, I see that some, but not all, STRIPS are available for maturities of about 3 years or more. If I choose a cpn note or bond, the interest is factored into the cash flows. I think it would be easier to just pick the higher yielding STRIPS for each rung.

I'm not actually attempting to build one but did get curious. My understanding of the rules is that as long as a secondary market nominal Treasury pays some coupon, the discount is ordinary income but is deferred until the year of maturity. So for example, CUSIP 912828ZQ6, 0.625% due 05/15/2030, sells for 86; CUSIP 912810SN9, 1.25% due 05/15/2050, sells for 43. Is there not more noise about such a "tax deferral hack" because these deeply discounted Treasurys are a temporary situation due to the COVID drop in interest rates followed by a spike, and are therefore a non-renewable resource?

First, your understanding is correct. Accrued market discount for coupon Treasuries is reported in box 1f of 1099-B for the year of disposition, unless you make a specific election to have it reported as annual interest income; it gets reported as interest income on Schedule B. By contrast, STRIPS accrued market discount is treated as OID and reported annually on form 1099-OID.

Not sure about the noise, but this has been discussed. I've pointed it out a number of times in various threads.

As to "deeply discounted Treasurys are a temporary situation due to the COVID drop in interest rates followed by a spike", we can use Treasury Auctions, and select Notes & Bonds to see yields and coupons for various auctions. The 5/15/2050 is a 30Y bond, so I'll filter on 30 in the Term field, then sort by Coupon descending. Here's a screenshot of the top rows in the table:



Sure enough, this bond had the lowest coupon of all 30Y Treasuries that have been auctioned, and all of the runner ups were auctioned in 2020 or 2021.

And yeah, 30Y Treasury yields are much higher now than the 1.342% yield for that auction:



So the prices of 30Y Ts auctioned in 2020 and 2021 have decreased a lot.

The reason I have no interest in a 30Y nominal T is due to unexpected inflation risk, but I've been happily buying long-term TIPS as real yields also have increased a lot:



Maybe there has not been more "noise" about the deeply discounted nominal bonds because others who post mostly lean toward my aversion to unexpected inflation risk.

Statistics: Posted by Kevin M — Mon Sep 28, 2026 2:58 pm