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The clean price is the quoted market price of a bond that excludes accrued interest. It reflects the bond's market value based purely on credit risk, interest rate sensitivity, and time to maturity, with no adjustment for how many days of interest have built up since the last coupon payment. Most bond markets around the world, including U.S. Treasury markets, use clean prices for quoting and comparing bonds.
The clean price is the number you see on a Bloomberg terminal or a brokerage screen. The amount you actually pay at settlement is the dirty price, which adds accrued interest on top of the clean price.
Bonds pay interest periodically, typically every six months. Between those payment dates, interest accrues daily. When you buy a bond midway through a coupon period, you compensate the seller for the portion of that upcoming coupon they earned but will not receive. That compensation is the accrued interest. Add it to the clean price and you get the dirty price, which is the actual cash you pay at settlement.
| Clean Price | Dirty Price | |
|---|---|---|
| Also Called | Flat price, net price, quoted price | Full price, gross price, invoice price |
| Includes Accrued Interest | No | Yes |
| Used For | Quoting, comparing, and reporting bonds | Settlement, calculating actual cash paid |
| Price Behavior | Stable between coupons; moves with market rates | Rises daily with accrual; drops on coupon date |
| Zero-Coupon Bonds | Equals dirty price (no accrued interest) | Equals clean price |
The reason markets use clean prices is comparability. Accrued interest changes every day based solely on the passage of time, not on any change in the bond's actual market value. If bonds were quoted on a dirty basis, two identical bonds issued on different dates would show different prices even though nothing about their fundamental value differed.
The clean price strips out that daily noise and lets you compare bonds on equal footing. Think of it like the sticker price of a car before taxes: it gives you the base cost so you can compare models before calculating what you actually owe at the dealership.
Accrued interest depends on the bond's coupon rate, the number of days since the last coupon payment, and the day-count convention that applies to the specific bond.
The most common day-count conventions are:
As a concrete example: take a bond with a 6% annual coupon paid semiannually, settled 91 days after the last coupon date, using the 30/360 convention. The coupon per period is 3 per 100 of face value. Accrued interest equals 3 multiplied by 91 divided by 180, which comes to approximately 1.52 per 100 nominal. If the quoted clean price is 102.40, you pay 103.92 at settlement.
The dirty price follows a predictable sawtooth curve between coupon dates. Each day, accrued interest adds a small increment to the dirty price. On the coupon date, the full coupon is paid, accrued interest resets to zero, and the dirty price drops back to equal the clean price. The next day, accrual begins again.
This sawtooth behavior is why portfolio managers and financial systems track both prices. Clean prices give you trend analysis and interest rate sensitivity. Dirty prices give you the accurate cash flow figure for settlements, collateral valuation, and portfolio mark-to-market accounting.
In repurchase agreement (repo) operations, the standard practice is to value fixed income collateral at the middle clean price and then add accrued interest separately when calculating the total collateral value. This approach is documented in best practice guidance for repo markets and is designed to prevent small daily fluctuations in accrued interest from affecting collateral calculations in ways that do not reflect genuine changes in a bond's market value.
Zero-coupon bonds have no periodic coupon payments, so there is never any accrued interest. The clean and dirty prices are identical at all times. U.S. Treasury STRIPS, which are zero-coupon instruments created by separating coupon payments from a Treasury bond, follow this same rule.
With deep roots in traditional finance and the digital asset industry, Acquire.Fi operates as a specialist M&A advisory firm. Coverage spans M&A, secondaries, OTC, and capital markets advisory across digital assets and frontier tech. Our team has decades of combined experience across every stage of the deal lifecycle.
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