Dated Date Explained: How It Impacts Bond Interest Accrual in 2025
Discover the concept of the dated date in bonds, its role in interest accrual, and why it matters to investors purchasing fixed-income securities today.
What Is the Dated Date?
The dated date marks the starting point when interest begins to accumulate on a fixed-income security such as bonds. This date is crucial for investors as it determines from when interest is calculated. If an investor buys a bond between interest payment dates, they must compensate the seller for the accrued interest from the dated date up to the purchase or settlement date, in addition to paying the bond's face value.
Understanding the Role of the Dated Date
Bonds issued by corporations, governments, or municipalities offer investors regular interest payments, known as coupons, until maturity. For instance, a bond with a $1,000 face value and a 5% annual coupon paid semi-annually will distribute $25 every six months. Suppose the bond’s dated date is February 1, 2018, with a maturity date of February 1, 2023, and interest payments scheduled on February 1 and August 1 annually. The period from the dated date to the first coupon payment (August 1, 2018) is the initial coupon period, during which interest accrues.
The dated date is essential because it defines the interest accrual period for the bond. When bonds are bought or sold, the accrued interest between the dated date and the settlement date is calculated to ensure fair compensation. Investors who purchase bonds pay this accrued interest upfront and receive reimbursement during the next coupon payment.
Sometimes, the dated date and the issue date—the actual day the bond is issued—may differ. This can occur due to weekends or holidays when bonds cannot be issued. For example, a bond may have a dated date on a Saturday, but the issue date will be the following Monday. In such cases, the bond trades with accrued interest reflecting this difference. Overall, the dated date can occur on, before, or after the issue date, affecting how interest is accounted for and paid.
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