Treasury Investment Growth Receipts (TIGRs)
Contents
Unraveling the Mystery of Treasury Investment Growth Receipts (TIGRs)
Discover the intricacies of Treasury Investment Growth Receipts (TIGRs), a financial instrument that left its mark on the investment landscape of the 1980s. From their inception to their eventual obsolescence, TIGRs played a significant role in the bond market.
Understanding TIGRs: An Overview
Treasury Investment Growth Receipts (TIGRs) emerged in the early 1980s as zero-coupon bonds based on U.S. Treasury securities held by Merrill Lynch. These bonds allowed investors to earn yields by purchasing them at a discounted price and redeeming them at face value upon maturity.
The Mechanics of TIGRs
TIGRs operated as fixed-income securities without coupons, sold at a deep discount to their par value. Investors earned returns based on the difference between the purchase price and the face value at redemption. Despite being discontinued, TIGRs remain available on the secondary bond market.
The Rise and Fall of TIGRs
Amidst declining interest rates in the early 1980s, TIGRs and similar securities gained popularity. However, the introduction of zero-coupon bonds by the U.S. Treasury rendered TIGRs obsolete, leading to their discontinuation.
The Relationship Between Interest Rates and TIGRs
The demand for TIGRs surged in an environment of falling interest rates. Investors were attracted to these zero-coupon bonds as they offered potential gains based on future interest rate expectations.