the investor occurs only at maturity. The impact of interest rate fluctuations on strip bonds, known as the bond duration, is higher than for a coupon bond. A zero coupon bond always has a duration equal to its maturity, and a coupon bond always has a lower duration. Strip bonds are normally available from investment dealers maturing at terms up to 30 years. For some Canadian bonds, the maturity may be over 90 years. In Canada, investors may purchase packages of strip bonds, so that the cash flows are tailored to meet their needs in a single security. These packages may consist of a combination of interest (coupon) and/or principal strips. In New Zealand, bonds are stripped first into two pieces—the coupons and the principal. The coupons may be traded as a unit or further subdivided into the individual payment dates. In most countries, strip bonds are primarily administered by a central bank or central securities depository. An alternative form is to use a custodian bank or trust company to hold the underlying security and a transfer agent/registrar to track ownership in the strip bonds and to administer the program. Physically created strip bonds (where the coupons are physically clipped and then traded separately) were created in the early days of stripping in Canada and the U.S., but have virtually disappeared due to the high costs and risks associated with them. Uses Pension funds and insurance companies like to own long maturity zero coupon bonds because of their high duration. That means that the bonds' prices are particularly sensitive to changes in the interest rate, and so offset, or immunize, the interest rate risk of the firms' long-term liabilities. Taxes In the United States, a zero-l coupon bond has original issue discount (OID) for tax purposes. Instruments issued with OID generally impute the receipt of interest, sometimes called phantom income, even though the bonds do not pay periodic interest. Therefore, zero coupon bonds subject to US taxation should generally be held in tax-deferred retirement accounts, to avoid taxes being paid on future income. Alternatively, when a zero coupon bond issued by a US state or local government entity is purchased, the imputed interest is free of U.S. federal taxes and, in most cases, state and local taxes. Zero coupon bonds were first introduced in the 1960s but did not become popular until the 1980s. The use of such instruments was