SDL-based STRIPS: Use for duration matching, not for tactical gains.
Starting June 12, the Reserve Bank of India (RBI) has permitted the use of the separate trading of registered interest and principal of securities (STRIPS) mechanism for State Development Loans (SDLs). It was earlier allowed for central government securities (G-Secs).
“This will enhance price discovery, deepen liquidity, and pave the way for a transparent zero-coupon yield curve in state debt,” says Vishal Goenka, cofounder, IndiaBonds.com.