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Consider the following security:

CUSIP: 3130A3GE8
Federal Home Loan Bank
Maturity: 2024-12-13
Coupon:  2.75 % (CPN)
Previous Coupon Date: 2019-06-13

Today is 2019-10-18, and since this instrument uses a 30/360 day count, I'd expect the accrual, not including today, to reflect 125 days worth of interest:

(125/360) * .0275 * 100 = 0.95486111%

Bloomberg confirms that my logic is correct. See stat DS130 in the screenshot below:

enter image description here

Now, let's say I want to compute the accrued interest including today. I'd expect to the calculation to be:

(126/360) * .0275 * 100 = 0.9625%

But as you can see from my screenshot, my calculation is off. Bloomberg is showing .97777778% (see stat DS113). The discrepancy seems to be caused by the fact that Bloomberg is using a day count of 128 (see stat DS032) instead of 126. Their day count is 2 days longer than mine. Why is that?

It turns out that 2019-10-18 is a Friday. Could they be factoring in the upcoming weekend into their accrual? If so, is this standard practice? In other words, since the bond markets are closed on weekends, is it normal to just accrue for that weekend's interest on the preceding Friday? Or perhaps the date discrepancy is related to something else entirely and has nothing to do with the weekend.

Would love some clarification. Thanks!

Thanks,

Yippie McSmashmouth

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    $\begingroup$ When is the Trade Date, today 20191018? When is the Settlement Date, Monday? You have to accrue up to but not including the settlement date. So in that case yes, you have to accrue for Sat and Sunday, as you suspected. $\endgroup$ – Alex C Oct 18 '19 at 22:05
  • $\begingroup$ The trade date is today. I assumed that trades settle same-day (is that not correct?). So at the close-of-business today (Friday, 2019-10-18), the item would be sitting in my account and there'd be only one day's worth of interest that had accrued, not three. $\endgroup$ – Yippie McSmashmouth Oct 18 '19 at 22:11
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    $\begingroup$ I believe that Federal Homa Loan Bank securities settle in T+1 like Treasuries (but I am not sure). $\endgroup$ – Alex C Oct 18 '19 at 22:12
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    $\begingroup$ No, bonds don't settle the same day. The convention varies by bond type. On Bloomberg, if you run BXT, it will show the number of days you settle as well as details for accrued calculation. $\endgroup$ – Dimitri Vulis Oct 19 '19 at 14:39

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