Do we know a J&J1 US Government Bond trade occuring on Tuesday, June 12th pay date is January 1st because we should know that interest occurs from the beggining of the year in this example? How do we differentiate the months starting with J here? Could the J&J bond pay date be July, for ex?
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Hi, J&J1 bonds always pay interest on the first of January and July.
When the bond settles, the buyer owes the seller interest that has accrued, but that they haven’t yet received, since the bond only pays interest twice a year.
So, if the bond settlement occurs on June 12th, the bond has accrued interest from January 1st up through June 11th, and the buyer must pay the seller that interest.
Here’s the chapter where we cover this!