A gilt strip separates a gilt's individual coupon payments and final repayment into stand-alone securities that each pay only at a set date, so a strip behaves like a zero-coupon bond.
What a strip is
A conventional gilt pays a series of coupons and then repays its nominal at maturity. A strip takes those separate payments apart. Each future coupon payment, and the final repayment, can be separated into a security of its own that pays a single lump sum on one date and nothing before it. That is what makes a strip a zero-coupon instrument: it has no running income, only a single payment at a known date.
Because a strip pays nothing until its date, its value rises purely as that date approaches — there is no coupon to collect along the way. The trade-off is that all of the return is realised at the end, rather than paid out in instalments. A reader used to a conventional gilt's twice-yearly income will find a strip's profile quite different even when it comes from the same underlying gilt.
The name comes from the idea of stripping the coupons off a gilt: the interest payments and the principal are separated and traded in their own right. Each separated payment keeps the credit of the original gilt, because it is the same government obligation, but it loses the running income. A strip maturing in a given year therefore behaves much like a single gilt that pays nothing until that year.
Why strips exist
Strips let a holder match a single future payment to a single future date without holding a gilt that pays income in between. That can be useful when a known sum is needed at a fixed horizon, because the strip's cash flow is a single amount rather than a stream. It can also be useful for thinking about the return on a gilt's individual payments, since each strip is priced on its own.
The mechanism also makes the relationship between a gilt and its parts visible. The parent gilt's price is, in principle, the sum of the values of its individual strips. When each strip is priced separately, a reader can see which of a gilt's payments the market is valuing most highly, rather than treating the whole gilt as one opaque number.
A consequence is that strips and their parent gilt should not drift apart in value for long. If the parts were worth noticeably more than the whole, holders would have a reason to buy the gilt and separate it; if they were worth less, the reverse. That tendency is a useful check when reading a strip's price: it should sit within reach of what the parent gilt's payments imply.
Valuing a strip: zero-coupon versus par curve
Two NPV columns help make sense of a strip's value, and the difference between them is the point. NPV (zero-coupon) discounts each flow at the report's bootstrapped zero-coupon curve at its own term. NPV (par curve) discounts each flow at the report's fitted par curve at its own term, in the same twice-a-year convention. Both are estimates from a curve rather than contractual amounts, but they answer slightly different questions.
A zero-coupon curve describes the value of a single payment at a single date, which is exactly what a strip is. A par curve is built from yields on gilts that pay coupons, so it describes the market's pricing of income-paying instruments. For a strip, the zero-coupon figure is the more direct fit; reading it beside the parent gilt's par-curve figure shows how much of the gilt's value sits in the discounting method rather than the payments themselves.
| Column | What it discounts at | Suited to |
| NPV (zero-coupon) | The zero-coupon curve at each flow's term | A single payment at one date — a strip |
| NPV (par curve) | The fitted par curve at each flow's term | An income-paying gilt as a whole |
| Coupon | Not discounted — it is the fixed rate | Reading the income a parent gilt pays |
Reading the two NPV figures together makes the discounting visible. A strip's NPV (zero-coupon) is the value of one payment at one date, discounted by the rate the market sets for that date. The parent gilt's NPV (par curve) is the value of the same stream priced through a curve built from income-paying gilts. Where the two diverge, the difference is telling you how much of a gilt's value comes from the shape of the curve rather than from the payments themselves, which is a distinction a single yield figure cannot show.
Where it shows on the site
The gilt's own page, opened from the conventional gilts list, carries the per-£100 cash-flow schedule, listing each coupon and the final repayment with its own date — the raw material a strip separates. The yield-curve page plots every priced gilt against its fitted benchmark, and it is from the curves on that page that the zero-coupon and par-curve figures are derived. Reading the schedule next to the curve page shows how each future payment is valued on its own date rather than as part of a single yield.
The two NPV figures are estimates, and the site labels them as such. They are a way to read the market's pricing of a payment at a date, not a promise that a strip will trade at that value. Where a reader wants to see how a single gilt's payments compare on a zero-coupon basis, the NPV (zero-coupon) figure beside the NPV (par curve) figure is the comparison the page exists to make.
Background, not advice
This article explains how gilt strips and zero-coupon exposure work; it is general background, not investment, tax or legal advice for any reader's circumstances. A strip's value moves as its date approaches and as the curve changes, so its price before maturity is not the amount it will pay. Curve-derived values are estimates, and the gilt's own schedule and the published curve are the primary sources for real figures.