Interest only (IO) strips are the interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments. The periodic.
Interest-only strip (IO) A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero. Interest Only Strip A derivative security whose cash flow derives exclusively from interest.
Interest Only Strips (IO Strips) are securities with cash flows based entirely on the monthly payments received from a mortgage pool. How it works/Example: Mortgages are paid in two parts, principal and interest. The total principal to be paid is predictable, whereas the interest paid is not predictable due to prepayments. The interest piece.