Treasury Interest Payment on maturity along with face value?

[medloh]

I bought my first Treasury last March.

CUSIP 91282CEA5

It was a 2 year 1.5% that I bought at a discount. At the time I recall the broker I purchased it from said it had an annual yield of over 5%.

I've only received one interest payment at the end of August so far. But to get that yield I think I'll need to get another interest payment along with the face value on the date of maturity, LEAP day, Feb 29, 2024.

I was just trying to confirm somewhere that I will get another interest payment when it matures. I've been unable to Google my way to an answer. Is there a way to confirm this?

 

[Finance Dave]

I copied/pasted this from their "notice". It appears you'll get that interest payment on the last day of February.

"Interest Payment Dates Last calendar day of August and February"

 

[jim584672]

Issued: February 28, 2022

Pay 0.75% coupon: August 31, 2022
Pay 0.75% coupon: February 28, 2023
Pay 0.75% coupon: August 31, 2023
Pay 0.75% coupon: February 29, 2024

Pay maturity: February 29, 2024

 

[pb4uski]

Yes, at maturity bonds pay a final interest coupon plus the maturity value.

That way you get interest as long as the bond is outstanding.

 

[medloh]

Thanks for the responses, appreciated.

It seems odd that the value of it in my portfolio doesn't seem to include the last interest payment. It appears to only be worth the discounted amount of the face value there.

I asked my broker Schwab about this, and the chat support person suggested I'd see the real value of it if I placed a sell order during market hours. I plan on holding it until maturity but it would be nice to see it's actual value including the interest in my portfolio view.

 

[pb4uski]

Can you elaborate with an example?

Typically when you buy a bond you pay the market price which is the bonds remaining contractual cash flows discounted at the market yield plus accrued interest from the last coupon date to the trade date. The accrued interest is paid because the entire next coupon is included in the cash flows but you are not entitled to all of it since you will own the bond for only part of the coupon period.

 

[jim584672]

Thanks for the responses, appreciated.

It seems odd that the value of it in my portfolio doesn't seem to include the last interest payment. It appears to only be worth the discounted amount of the face value there.

I asked my broker Schwab about this, and the chat support person suggested I'd see the real value of it if I placed a sell order during market hours. I plan on holding it until maturity but it would be nice to see it's actual value including the interest in my portfolio view.

Maybe I'm missing something but February 29th didn't happen yet.

Your brokerage statement might show an accrued interest amount somewhere on it.

 

[mcbraemer]

Maybe I'm missing something but February 29th didn't happen yet.

Your brokerage statement might show an accrued interest amount somewhere on it.

February 29th? Yikes!!! Looks like a potential calendar programming bug waiting to happen.

Let’s hope the QA testing team was on the ball. Keep an eye on it on the 28th, 29th and 1st (I’m certain you will)!

 

[pb4uski]

Thanks for the responses, appreciated.

It seems odd that the value of it in my portfolio doesn't seem to include the last interest payment. It appears to only be worth the discounted amount of the face value there.

I asked my broker Schwab about this, and the chat support person suggested I'd see the real value of it if I placed a sell order during market hours. I plan on holding it until maturity but it would be nice to see it's actual value including the interest in my portfolio view.

The price of bonds are always excluding accrued interest which is why you pay the negotiated price plus accrued interest each time you buy a bond. Of course, with a new issue there is no accrued interest. Your dashboard will show the current market price, which excludes accrued interest since that is the convention of how bonds are traded. The buyer will pay for accrued interest since the last interest payment date essentially paying the seller the portion of the next interest coupon for the period of time that the seller owned the bond.

If you place an order, the screen should show you the value and a separate line for the accrued interest.

 

[medloh]

Thanks again for all the helpful responses. I finally got around to testing it out with a sell order, getting all the way to the review order screen, but not selling...

Principal Amount:
$39,870.70
Accrued Interest:
$252.20
Est. Total Proceeds: Inline Help
$40,122.90

So the accrued interest finally shows up there.

Still seems strange why they don't show that anywhere on my positions page for the Treasury's market value, but it is what it is. I like to track all my options computing a realized annual yield and remaining annual yield, but to do that with this treasury I'd need to go to the review order page each time.

Think I may try a high quality corporate bond next. I assume it will probably show up in my portfolio the same way.

 

[pb4uski]

^^^ I think it is easier that accrued interest isn't included in the price or value. I trade a lot of preferred shares and there is no accrual for unpaid dividends (since unlike bonds, preferred dividends have to be declared before they are a legal liability) but is it a PITA because in the normal course the price increases for a portion of the expected dividend and then goes down when the dividend is paid.

 

[jim584672]

Looking at my Schwab statement it does list accrued interest as an entry.