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. Additional information 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 Charges • 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.


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