What it means
A coupon-bearing bond promises interest according to its terms, and the dated date provides the starting point for the first accrual period. That reference allows the issuer, intermediary and investor to identify when interest begins accumulating.
It can differ from delivery, since a new issue can begin accruing before the buyer settles and receives it, so the actual terms must be checked rather than assuming that interest always starts on the day funds change hands. A purchase price and accrued interest are separate concepts.
If a buyer receives the next full coupon despite acquiring the bond after accrual began, settlement may include compensation for the portion already accrued, which avoids treating the whole coupon as interest earned only since purchase. The MSRB's primary-market data glossary distinguishes issue dated date from issue settlement date and original dated date, and entering one date in every field without checking the documents can produce incorrect interest calculations.
For an outstanding bond, accrued interest usually starts from the most recent applicable interest-payment date rather than the original dated date, which remains part of issue history. It should not lead an investor to charge years of already paid interest again.
Coupon frequency and the first payment date determine how the opening period works, and a first coupon can involve an irregular period under the contract, so do not assume that every first payment equals exactly half the annual coupon merely because later payments are semiannual. Day-count conventions matter, because a 30/360 calculation and an actual-day calculation can produce different accrued amounts for the same pair of calendar dates, and the dated date does not specify the convention.
The settlement endpoint matters too, since interest calculations can exclude the settlement day under the relevant convention. Use the issue's contractual basis and market treatment rather than casually counting inclusive calendar days.
A dated date does not guarantee payment, since it describes the interest schedule while the issuer's obligations and ability to meet them are separate, and a bond with an accurately recorded date can still involve credit risk. The term should also be distinguished from maturity, which concerns when principal is due, whereas the dated date concerns the beginning of interest accrual, so swapping them can radically distort an analysis.
When a security is reopened or additional bonds are issued, original issue information and new settlement information may coexist, and the documents determine the applicable accrual and payment treatment. A newly purchased security need not begin its economic life on the purchase date.
For a non-finance investor, retain the dated date, settlement date, coupon schedule and day-count basis together, check the initial accrued-interest calculation and the amount of the first payment, and use the date alongside the bond's terms.
In practice
Real-world examples.
Example
A fictional bond begins accruing on January 1 but settles on February 1. The buyer checks whether settlement requires paying the interest already accrued from the dated date. Receiving the next full coupon does not mean all of it was earned after February 1.
Example
An outstanding bond originally dated several years earlier pays interest every six months. A buyer settling between current coupon dates calculates accrued interest from the relevant latest coupon date, not from the original dated date.
Example
Two securities share a dated date and coupon rate but use different day-count conventions. Their accrued-interest amounts for a settlement interval may differ. Matching dates alone does not establish identical settlement cash.
Formula
Calculation
For a simple applicable accrual period, accrued interest = face amount x annual coupon rate x day-count fraction. A fictional $10,000 bond at 6% with a 30/360 fraction of 30/360 accrues $10,000 x 6% x 30/360 = $50. The issue terms determine the starting date and convention; this example does not establish the settlement amount for every bond or irregular first coupon.
Second example. If the same bond settles 60 days after its dated date on a 30/360 basis, accrued interest is $10,000 x 6% x 60/360 = $100. For a new issue, the buyer pays that $100 at settlement and receives it back as part of the first full coupon.Case study
Seen in the real world.
Fictional case: A manager buys a newly issued municipal bond for a cash reserve and questions an accrued-interest line on the settlement statement. The issue began accruing before delivery, so the calculation covers the interval from its dated date to settlement under the stated convention. She verifies that the next coupon includes that period and records the purchase price and accrued interest separately. The review explains the cash required without confusing the dated date with maturity or assuming the first coupon is entirely new investment income.
Watch out
Common mistakes.
- Assuming the dated date always equals issue delivery or purchase date.
- Using the original dated date for every secondary-market accrued-interest calculation.
- Ignoring the coupon schedule and day-count convention when calculating interest.
Questions
People also ask.
Is the dated date the maturity date?
No. It starts initial interest accrual rather than ending the bond's term.
Can it differ from settlement?
Yes. Interest can begin before the security is delivered.
Does it define every accrued-interest calculation?
No. Later coupon dates and the applicable convention also matter.
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