Clean Price, Dirty Price and Day Counts: Why Your Bond Invoice Never Matches the Quote
You buy a bond quoted at 98.50 and the debit comes to 99.87 per 100. Nobody cheated you. You’ve met the market’s oldest pair of conventions: the clean price, which is what gets quoted, and the dirty price, which is what you pay. This guide covers the mechanics, and the day-count conventions that plenty of finance professionals get wrong for Indian instruments.
Why two prices exist
A bond earns its holder interest every day but pays out only on coupon dates. If you buy 60 days into a 180-day coupon period, the seller earned 60 days of that coupon and you’ll earn 120, yet the issuer pays the whole coupon to you. So at settlement you hand the seller their 60 days of interest upfront:
Dirty price = clean price + accrued interest
Markets quote clean prices because they’re comparable across days. A clean price doesn’t tick mechanically upward as interest accrues and drop on coupon dates the way a dirty price does. Your contract note, though, always settles dirty.
Nothing is lost either way, since the accrued interest you pay comes straight back inside the next coupon. It’s even deductible against that coupon’s taxable interest, a detail covered in the taxation guide.
The day count decides the rupees
“60 days of interest” sounds unambiguous. It isn’t, because the market needs a rule for counting days, and India uses different rules for different instruments.
| Instrument | Convention | Meaning |
|---|---|---|
| G-secs, SDLs | 30/360 (European) | Every month counts as 30 days, year = 360 |
| Listed corporate bonds | Actual/Actual | Real calendar days ÷ real days in the coupon period (SEBI standardised this in Nov 2016) |
| T-bills / money market | ACT/365 | Real days over a 365-day year |
Take ₹10 lakh face of a 7.26% semi-annual bond, last coupon 15 January, settling 15 March.
- Under 30/360: Jan 15 to Mar 15 counts as exactly 60 days. Accrued = 10,00,000 × 7.26% × 60/360 = ₹12,100.00
- Under Actual/Actual: the same span is 59 actual days, since 2026 isn’t a leap year, inside a 181-day coupon period. Accrued = 10,00,000 × 3.63% × 59/181 = ₹11,833.98
Same bond, same dates, and a ₹266 difference that comes purely from the convention. It’s why a G-sec contract note and a corporate-bond contract note computed “the same way” won’t reconcile, and why our accrued interest calculator makes you pick the bond type first.
Reading your contract note like a professional
A proper OBPP or broker note shows the ISIN, settlement date, clean price, accrued interest and total consideration. Reconcile it in three steps.
- Feed the coupon, dates and convention into the accrued interest calculator and match the accrued line to the rupee.
- Feed the clean price into the YTM calculator and confirm the yield you were promised survives independent math.
- Check the settlement date. Weekend and holiday shifts move accrued interest by a day or two, which explains most small mismatches.
If a platform will only show you an all-in price per bond without splitting clean from accrued, treat that as a yellow flag. The split is where markups hide, because an inflated clean price looks identical to accrued interest once they’re bundled into one number.
Edge cases worth knowing
Buying just before a record date. The issuer pays the coupon to whoever holds the bond on the record date, and G-secs also have a short “shut period” when transfers pause. You neither gain nor lose, because accrued interest nets it out, though the cashflow timing can surprise you.
Ex-interest and cum-interest trades in corporate paper follow the record date the same way. The accrued-interest line turns negative for ex-interest trades.
Coupon dates falling on holidays. Payment shifts according to the business-day convention in the bond’s information memorandum, usually without changing the amount.
Once clean and dirty stop being mysterious, bond quotes read like any other price, and you’ll stop suspecting a platform overcharged you 1.4% when what you were paying for was February and March’s interest.
Educational content, not investment advice. Tax rules current for FY 2026-27 to the best of our knowledge, but verify with a professional before acting. See the full disclaimer.