Accrued Interest and the Bond Market
When buying bonds in the secondary market, the buyer will have to pay accrued interest to the seller as part of the total purchase price. An investor that purchases a bond sometime between the last coupon payment and the next coupon payment will receive the full interest on the scheduled coupon payment date given that they will be the bondholder of record. However, since the buyer did not earn all of the interest accrued over this period, they must pay the bond seller the portion of the interest that the seller earned before selling the bond.
