I'm learning about fixed income for the first time and my understanding is that the value of a bond depends on three major variables:

  1. The face value
  2. The time to maturity
  3. The coupon rate a.k.a. the interest rate paid semi-annually or annually

That's fine, but I also understand that they are traded on the secondary market. Making an analogy to stocks and dividends distributions, is it the case that the market value of a bond usually goes up before the date when a coupon payment is made?

  • 8
    the value does not go up in a single night; it goes up almost every day almost linearly (assuming every other things are constant) in a way that at the coupon payment day, there is no difference between selling the bond or getting the coupon (in terms of the profit made that day).
    – Our
    Commented Apr 6, 2020 at 6:41

2 Answers 2


Unlike Stocks or ETFs where there is a hard cutoff of dividend ("Ex-Dividend"), the buyer of the Bonds has to pay "Accrued Interest" to the seller if the Bonds were purchased between two payment dates. The Accrued Interest is prorated calculation is accurate to 1 day.

  • 3
    Stocks which pay dividends also have the dividend priced in and will gradually rise over the quarter or other dividend period, then drop the morning it goes ex. (My brokerage even automatically reprices limit orders, to my annoyance.) Commented Apr 6, 2020 at 3:39
  • 18
    The title question says "right before" and this is not quite correct. The value increases nearly uniformly (linearly) between payouts, not suddenly just before a payout.
    – nanoman
    Commented Apr 6, 2020 at 3:48
  • Is the accrued interest payment due on the payment date or the purchase date, or does it vary?
    – HAEM
    Commented Apr 6, 2020 at 9:46

Well, sort of. The quoted price in the secondary market is for the bond itself, but when you buy the bond you pay that price plus accrued interest. So the closer you are to the payment date, the higher the total cost.

  • Dirty Price = Clean Price + Accrued Interest
    – Flux
    Commented Aug 26, 2020 at 13:32

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