Flat Bond

AAA

DEFINITION of 'Flat Bond'

A debt instrument that is sold or traded without accrued interest, the fraction of the bond's coupon payment that the holder earns between periods of bond payments. There are three possible reasons that a bond would not have any accrued interest:

  1. No interest is presently due on the bond according to the date of sale and terms of the bond's issue.
  2. The bond is in default.
  3. The bond settles on the same date as the interest is paid and therefore no additional interest has accrued beyond the amount already paid out.

INVESTOPEDIA EXPLAINS 'Flat Bond'

If a bond price is referred to as "dirty" it means that the interest accrued since the last coupon payment is included in the price of the bond. If it is referred to as "clean," the price does not include any accrued interest.

Corporate and municipal bond issuers assume a 30-day month and a 360-day calendar to calculate the accrued interest on a bond. However the accrued interest on government bonds is usually determined on the basis of the actual calendar day from date of issuance (called the actual/actual day count).

RELATED TERMS
  1. Maintenance Bond

    A type of surety bond purchased by a contractor that protects ...
  2. Sinkable Bond

    A bond issue that is backed by a fund, called a sinking fund, ...
  3. Coupon Bond

    A debt obligation with coupons attached that represent semiannual ...
  4. Clean Price

    The price of a coupon bond not including any accrued interest. ...
  5. Interest

    1. The charge for the privilege of borrowing money, typically ...
  6. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Bonds & Fixed Income

    Six Biggest Bond Risks

    Don't assume that you can't lose money in this market - you can. Find out how.
  2. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  3. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  4. Bonds & Fixed Income

    Savings Bonds For Income And Safety

    Bonds offer undeniable benefits to investors, including safety and tax advantages.
  5. Mutual Funds & ETFs

    The Bond Market: A Look Back

    Find out how fixed-income investments evolved in the past century and what it means today.
  6. Bonds & Fixed Income

    Why Stocks Outperform Bonds

    Why have stocks historically produced higher returns than bonds? It's all a matter of risk.
  7. Bonds & Fixed Income

    Boost Bond Returns With Laddering

    If you want a diversified portfolio and steady cash flow, check out this fixed-income strategy.
  8. Options & Futures

    Common Bond-Buying Mistakes

    Avoid these errors made daily in bond portfolios everywhere.
  9. Home & Auto

    The Bear On Bonds

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  10. Bonds & Fixed Income

    Why Didn't Quantitative Easing Lead To Hyperinflation?

    Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center