Series 62

AAA

Brokerage Office Procedure - Accrued Interest For Government Notes And Bonds

The calculation for accrued interest on US government securities uses an actual calendar year and each month contains the actual number of days. Keep in mind that interest accrues up to, but not including, settlement date and, because US government securities settle on the next business day, interest accrues only up to the trade date.

Example:

An investor purchases 10M 8% US Treasury bonds due January 1st 2030 on Monday

April 1st for regular way settlement. How much accrued interest will the investor owe?

(10,000 x 8%) X (91 /365) =

800 X .2493 = $199.44

To determine the number of days in the above calculation we used the actual calendar days in each month as follows:

January

31 days

February

28 days

March

31 days

April

1 day

Total

91 days

If the trade had been executed on Friday April 1st the calculation would look like this:

(10,000 x 8%) X (93 /365) =

800 X .2547 = $203.83

Interest continues to accrue on weekends even though weekends are not good settlement dates.

January

30 days

February

30 days

March

30 days

April

3 days

Total

93 days

Rules For Good Delivery
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