Previous coupon payment On 28 Feb 2012: Bank B (selller)Company D (buyer) Who holds this bond on the register closing date? Who will receive the full coupon?

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Presentation transcript:

Previous coupon payment On 28 Feb 2012: Bank B (selller)Company D (buyer) Who holds this bond on the register closing date? Who will receive the full coupon? But from 30 Nov 2011 to 28 Feb 2012 the bond belonged to Bank B, (the seller), So Bank B, (the seller) has to receive accrued interest for the period from 30 Nov 2011 to 28 Feb 2012 (90 days) Add accrued interest to clean price, to compensate Bank B All in price = Clean price + Accrued interest for 90 days Thus this bond trades Cum interest on 28 February 2012 Bonds – Cum or ex interest? 30 Nov April May 2012 Register closes Next Coupon payment Transaction date 28 Feb 2012 Company D (buyer)

Previous coupon payment On 20 May 2012: Bank A (selller) Bank B (buyer) Who holds this bond on the register closing date? Who will receive the full coupon? But from 20 May 2012 to 31 May 2012 the bond belonged to Bank B, (the buyer), So Bank B, (the buyer), has to receive accrued interest for the period from 20 May 2012 to 31 May 2012 (11 days) Subtract accrued interest from clean price, to compensate Bank B All in price = Clean price Accrued interest for 11 days Thus this bond trades Ex interest on 20 May 2012 Bonds – Cum or ex interest? 30 Nov April May 2012 Register closes Next Coupon payment Transaction date 20 May2012 Bank A (seller)

Previous RegisterNext coupon closescouponpayment If bond trades from 30 Nov to 30 April: Bond belongs to buyer on register closing date. Buyer will receive all interest Seller must be refunded Cum interest Bonds – Cum or ex interest? 30 Nov April May 2012 If bond trades from 30 April to 31 May: Bond belongs to seller on register closing date. Seller will receive all interest Buyer must be refunded Ex interest