What is accrued interest?

Interest that is due but has not yet been paid or received

A bond can be bought or sold at any time between coupon payment dates (or interest payment dates).

The buyer must then pay the seller the interest accrued for the period between the last coupon date and the transaction's value date, since the buyer will receive the full coupon amount on the next coupon date.

Example:

Let’s consider a €1,000 bond with a 5% coupon. This coupon is paid on April 1 of each year.

If this bond is sold on July 1, the buyer must pay the seller, in addition to the face value, the portion of interest accrued from April 1 to July 1, which is:

• Nombre de jours entre le 1er avril et le 1er juillet : 91 jours répartit de la manière suivante :
  
  • April = 30 days - 1 = 29 days
  • May = 31 days
  • June = 30 days
  • July = 1 day