Glossary of Terms



Bond Price

The bond price is the price at which you purchase the bond, and this figure may fluctuate at any time during trading hours.

Yield to Maturity,YTM

It refers to the annualized rate of return that an investor will receive if they hold the bond until its maturity date, assuming that both the principal and interest of the bond are paid on time (excluding the cost of transaction commissions).

The present value obtained by discounting all future cash flows of the bond at the yield to maturity equals the purchase price. That is, the total present value of future interest payments and final principal repayment equals the bond's current market price.

  • "Since the maturity of Bills is less than a year, their Yield to Maturity (YTM) is actually the Bond Equivalent Yield (BEY).

    • When the remaining days to maturity of the Bill are less than six months, it's equivalent to calculating the maturity yield i under simple interest, based on the quote and the face value of the bond.

    • When the remaining days to maturity of the Bill are more than six months, it's equivalent to compounding interest for the first six months with a semi-annual payment period; for the part exceeding six months, interest is calculated based on the daily interest rate (annual interest rate divided by the actual number of days in the year) using simple interest.

  • Bond & Note:Yield to Maturity

    • Bond Price = Present Value of the Bond Principal + Present Value of the Bond Coupon - Accrued Interest

    • To calculate the yield that makes the above formula true based on the bond's quote and face value, this yield value is the Yield to Maturity (YTM).

Related Parameters in the Formula:

  • P = Bond quote (net price)

  • d = discount rate

  • s = Total days in the current interest period (next interest date - last interest date) (APPlicable only for Bond & Note, related to bond maturity date. Generally, interest dates follow the principle of mid-month corresponding to mid-month, and month-end to month-end.)

  • r = Remaining days in the current interest period (next interest date - settlement date) (For Bills, this is equivalent to the remaining days to maturity)

  • y = Actual days of the year (Used only for Bills, related to bond issue date. For example, a 4-week Bill issued on 2004/01/22 with a maturity date of 2004/02/19. Actual days y = 2005/01/22 - 2004/01/22 = 366 days)

  • N = Number of remaining interest payments between the settlement date and redemption date

  • C = Coupon = Bond face value * coupon rate

  • i = Yield to Maturity

Coupon Payment Frequency

The coupon payment frequency refers to the regular time intervals at which interest payments are made on a government bond, such as twice a year or once a year. U.S. Treasury notes and bonds typically have a fixed schedule of making interest payments twice a year.

Remaining Term

The number of years left from the current purchase date until the maturity of the bond.

Maturity Date

The expiration date of the bond.

Execution date

The date when the transaction is agreed upon, but the transfer of bond ownership has not yet occurred.

Settlement date

he final completion date of the transaction, where the buyer must pay the seller, and the seller transfers the assets to the buyer. This is usually the day after the execution date. Accrued interest is calculated based on the settlement date.

Bid Price

The reference price for buying bonds from the platform. The quoted price for T-Bills is usually the interest rate, i.e., the Discount Rate; for Bonds and Notes, it is typically the price. Quotations do not include transaction commissions and accrued interest.

Ask Price

The reference price for selling bonds that one owns. It represents the price buyers are willing to pay.


The midpoint between buying and selling prices on the market. It can be used as a reference as it often reflects the supply and demand situation in the market.


A measure of the sensitivity of a bond's price to changes in interest rates, which can help predict the direction and magnitude of bond price changes when market interest rates rise or fall.

Modified Duration

A variant of duration, typically used to measure the absolute change in a bond's price due to interest rate changes.


A financial metric measuring the non-linear response of a bond's price to changes in interest rates. Convexity is the second derivative of the bond's price with its expected yield, considering the curvature of the bond price when market interest rates change.

Accrued Interest

Accrued interest is not a fee but the interest paid by the buyer to the seller for the holding period. Although bonds generally pay interest semi-annually, accrued interest is calculated daily after purchase, and the buyer must pay this amount to the seller during a transaction. Accrued interest is reset and recalculated after each interest payment.

Example to illustrate accrued interest: Suppose there is a Treasury bond with a face value of $1,000 and a coupon rate of 5%, accruing interest twice a year, with interest dates on June 30 and December 31. If you purchase this bond on September 1, and the next interest payment date is December 31, you need to pay the seller the accrued interest at the time of purchase.

The calculation of accrued interest is as follows:

Face Value × Coupon Rate × (Number of Unpaid Days / 365)

With unpaid days from June 30th to September 1st. totaling 63 days, and the bond face value at $1,000 with a 5% coupon rate, the accrued interest is:

Accrued Interest = $1,000 × 5% × (63 days / 365 days) ≈ $8.63

Therefore, if you purchase this bond on September 1, you need to pay the seller about $20.68 in accrued interest to compensate for the interest they would have earned. Then, on December 31 of that year, you will receive the full interest payment.

(Note: The above example uses a general formula for calculating accrued interest for ease of understanding. Each institution may have different definitions of the "interest coefficient," and actual calculations should be based on specific results.)

How is the price of bonds or notes determined?

The price of bonds or notes may be at par value (also known as face value), or it may be above or below the face value. The price depends on the yield to maturity and the coupon rate.


Bond/Note Price

Higher than Coupon Rate

Lower than Par Value

Equal to Coupon Rate

Par Value

Lower than Coupon Rate

Higher than Par Value

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