How does the settlement of Bond works?
This is an illustration on how the settlement of a bond works.
For example, SGD 250 000 Corporate Bond was bought at the price of 102.00 % (of the principal amount) on 23 March 2015. (Trading account to be pre-funded) It carries a coupon of 5.90% per annum and matures on 17 July 2017. The corporate bond was issued on 18 July 2014.
Accrued interest: 68 days. Yield to maturity: 4.96%. Coupon payment: 17 Jan & Jul
The investment is as follows (Assume the day convention is 365 days):
Principal amount payable
= Principal x Bond price
= SGD 250,000 x 102.00/100
= SGD 255,000
Accrued Interest payable
= Principal x coupon x number of days after last coupon payment
= SGD 250,000 x 5.90/100 x 68/365
= SGD 2,747.95
Total amount payable by the investor client
= Principal amount payable + Accrued interest payable
= SGD 255,000 + SGD 2,747.95
= SGD 257,747.95
• There are no commission for bond trading. A percentage spread is included in the price of the bond quoted to the client.
• There is a custody fee of 0.05% p.a of the market value and GST payable monthly for bonds under custody with Clearstream/Euroclear.
Have an enquiry? Get in touch with us at (+65) 6212 1818 or message us below!
Not yet an account holder? Open an account online here