BOI

[bruncher]

The FT gives April 17th as ex-div date and May 7th as payment date.

If interest is calculated daily, does the interest accrued from 17th April get paid in November? I assume interest accrues 365 days a year, is that correct?

I bought some BOI earlier this week. Selftrade originally charged me +169 days accrued, but then revised their invoice two days later to minus 12 days.

I would be interested to understand how this calculation is made, also if the calculation is from purchase date or settlement date.

[GoSeigen]

The FT gives April 17th as ex-div date and May 7th as payment date.

If interest is calculated daily, does the interest accrued from 17th April get paid in November? I assume interest accrues 365 days a year, is that correct?

I bought some BOI earlier this week. Selftrade originally charged me +169 days accrued, but then revised their invoice two days later to minus 12 days.

I would be interested to understand how this calculation is made, also if the calculation is from purchase date or settlement date.

Interest accrues daily but it is not the parties to a trade of the bonds who pay each other interest! It is the issuer and their payment is twice annually on the payment date.

The calculation of accrued interest is a notional value of relevance mainly for tax purposes. If you hold in an ISA/SIPP don't worry about it. If outside an ISA/SIPP then the 12 days' interest will be taxable and should be declared on your return under the Accrued Income Scheme (look it up). This is because as holder of the bonds over that period you are deemed to have received the interest. You would of course take account of the interest and ex dates in the price you are prepared to pay or receive on purchase or disposal.



GS

[bruncher]

I would expect to be charged for accrued interest, no problem. But in the revised invoice they have subtracted interest from the price of the bonds. It actually shows as negative interest:

"-12 days accrued interest"

I've never seen that before.

[Alaric]

The FT gives April 17th as ex-div date and May 7th as payment date.

Bear in mind that you are buying second hand.

If you buy between those two dates, the seller receives the coupon. That would be why you get negative accrued income, because you don't get a coupon on May 7th.

If there wasn't an accrued income scheme, all sorts of tax dodges would be possible, depending on which was higher taxed of income or gain. It's possible to manipulate the relationship between income and capital with dividends on equities, but the relationship between capital value, dividend and xd dates is far less clear cut than with bonds.

[hiriskpaul]

I would expect to be charged for accrued interest, no problem. But in the revised invoice they have subtracted interest from the price of the bonds. It actually shows as negative interest:

"-12 days accrued interest"

I've never seen that before.

Perfectly normal market practice. You are not getting the next coupon, the seller is, so to make it fair the seller compensates you with 12 days interest between settlement date and coupon payment date. You then accrue from the payment date.

[bruncher]

Thanks, Lemonfool experts, this is the best University on the interweb!

[bruncher]

BTW

I can never trade BOI on Selftrade's online service, I always have to talk to someone. Is this the case with other brokers?

[hiriskpaul]

BTW

I can never trade BOI on Selftrade's online service, I always have to talk to someone. Is this the case with other brokers?

For many brokers yes. Hargreaves Lansdown does have online quotes, which seem fine today although sometimes there is insufficient liquidity for BOI to get an online quote. I just tried a buy in my SIPP for 2000 and was quoted 204p. Attempting to sell my entire holding of 20000 gave a quote of 200.25. I have some in my iWeb ISA, but have never managed to get an online buy or sell quote with them, whatever the size.