Why Bond Accrued Interest Can Be Negative After the Ex-Coupon Date

Summary

The document explains how accrued interest can be negative for bonds traded in markets that use an ex-coupon date before the end of a coupon period. The holder recorded by that date is entitled to the full coupon, even if the bond is sold before the coupon payment date. A buyer who settles after the ex-coupon date does not receive that upcoming coupon.

To reflect this entitlement in the transaction, the seller’s proceeds are adjusted by subtracting interest accrued from settlement through the end of the coupon period. This can make the quoted accrued amount negative, so accrued interest is not necessarily positive in every bond market or settlement window. The explanation is specifically about ex-coupon conventions outside the United States; it does not claim that this convention applies to all markets or explain the mechanics of US Treasury accruals. It offers a market-convention explanation rather than a broader bond-pricing analysis.

Key ideas

• Some markets designate an ex-coupon date before the coupon period ends.
• The holder of record on the ex-coupon date remains entitled to the full coupon.
• A sale settling after that date may deduct interest through the end of the coupon period from the seller’s proceeds.
• This convention can produce negative accrued interest, but the explanation is not specific to US Treasury practice.

Tags

# Negative Accrued for treasury bonds?


# Negative Accrued for treasury bonds?












I am looking at some spreadsheets that show the US treasury bonds have some negative accrued. Why would that be the case? Shouldn't bond accruals always be positive?

## Answer by Dimitri Vulis (score 0, accepted)

https://quant.stackexchange.com/a/71921

In some countries/markets other than US, bonds (treasury and corporate too) have an "ex coupon" date some days before the end of the coupon period. The bondholder of record is determined using the ex coupon date, and receives from the bond issuer the full coupon, accrued over the entire coupon period. If he sells the bond settling after the ex coupon date and before the end of the coupon period, then the proceeds are the clean price minus the interest accrued from the settle date to the end of the coupon period.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.