Is there a convention on when interest should be accruing? That is, does interest on a bond accrue during the business day, or does it accrue overnight? Are you able to point me in the direction of a well-regarded resource to back this up?

Thank you.

  • $\begingroup$ The accrued interest is based on the day count, and the day count increments overnight, when the market is formally closed. $\endgroup$ – noob2 Jul 29 '19 at 15:19

@noob2 While that is an easy way to look at it from a calculation perspective, is it not the case that the interest reflects the risk taken by the holder of the bond? In which case there is no risk overnight as no businesses are open, it cannot be traded, and cannot default. The risk is solely over the course of the business day and therefore the interest should accrue over that period?

The OP also asked for a well-regarded source to back up any answer. I am not able to provide this, but am interested in the true answer, or if it is down to individual reporting systems to determine methodology.

Looking at BoD vs EoD accrued values, I believe BoD + daily accrued = EoD, but if it accrues overnight then it would be BoD = EoD, then BoD+1 = EoD + daily accrued. Would love to see a reference to show definitively which is correct.


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