The Sale Date
This is when a borrower and the financing team market the bond to investors and ultimately lock in the deal terms, including the coupon rate, yield, price, and call provisions. No money changes hands at this time — investors simply affirm their commitment to purchasing the bond.
The Dated Date
This is the closing date, when the investor hands the borrower (i.e., bond issuer) money in exchange for the bond. If the delivery date is not the same as the dated date, the investor must pay the borrower any accrued interest generated from the dated date to the delivery date.
The Delivery Date
This is the closing date, when the investor hands the borrower (i.e., bond issuer) money in exchange for the bond. If the delivery date is not the same as the dated date, the investor must pay the borrower any accrued interest generated from the dated date to the delivery date.
The First Interest Payment Date (FIPD)
The FIPD is when the first interest payment is due on the bonds. This usually occurs on or within the number of days in the frequency of the interest payment schedule. For example, in a semi-annual payment schedule, it would occur at or around 180 days.
If the period from the dated date to the FIPD is less than the number of days in the interest payment frequency – for example, if the FIPD is 120 days after the dated date when interest payments are semi-annual – this is known as a “short” interest repayment period. Conversely, if the period from the dated date to the FIPD is greater than the number of days in the interest payment frequency — say, 220 days after the dated date when interest payments are semi-annual— this is known as a “long” interest repayment period.
Periodic Interest Payment Dates
The borrower pays interest on the bonds to the investor on the interest payment dates, starting on the FIPD and ending on the maturity date. Most municipal bonds pay interest semi-annually, meaning that there are two periodic interest payment dates each year. Bonds can also pay interest on other frequencies, including weekly, monthly, or quarterly.
The Maturity Date
This is when the principal amount of a bond becomes due. The borrower pays back the face amount of the bond plus the last remaining interest payment.
Example:
An investor buys a bond with the following dates:
Dated Date: July 1, 2023
Delivery Date: July 1, 2023
First Interest Payment Date: January 1, 2024
Maturity Date: July 1, 2033
Face Value: $1,000,000
The bond begins accruing interest the same day the investor delivers the borrowed money to the borrower, July 1, 2023. There is a full semi-annual interest payment due to the investor on January 1, 2024 (a 180-day period). Interest payments would then be due each July 1 and January 1 until July 1, 2033, when the bond matures. On July 1, 2033, the borrower repays the face value of the bond – $1,000,000 – with the final interest payment.
What’s important here?
Bonds have several key dates that define:
- When the investor pays for the bond
- When the investor receives interest payments
- When the borrower returns the initial borrowed amount back to the investor
