The coupon
The coupon is the interest rate the issuer pays on the face value of the bond. A 5% coupon on a bond with a face value of 200,000 pays 10,000 a year. Most fixed-rate Eurobonds pay annually; US dollar issues sold globally often pay semi-annually.
Day-count conventions
When interest has to be calculated for part of a period, a day-count convention decides how days are counted.
| Convention | How it works | Common use |
|---|---|---|
| 30/360 | Each month treated as 30 days, the year as 360. | Traditional for fixed-rate Eurobonds, many USD corporates. |
| Actual/Actual (ICMA) | Actual days in the period divided by actual days in the coupon period. | Most euro-denominated fixed-rate bonds and government bonds. |
| Actual/360 | Actual days divided by 360. | Floating-rate notes and money-market instruments. |
Accrued interest
Bonds are quoted at a "clean" price that excludes interest earned since the last coupon. When a bond changes hands between coupon dates, the buyer pays the seller the clean price plus accrued interest; together these are the "dirty" or invoice price. On the next coupon date the buyer receives the whole coupon.
Business days and payment
If a coupon date falls on a weekend or holiday, the terms say how it is adjusted, usually to the following business day. Payments are made through the paying agent to Euroclear and Clearstream, which credit their participants' accounts.