Clean Price vs Dirty Price (Bond): Why Your Confirmation Slip Shows a Different Number
Clean price is a bond’s quoted market price excluding any interest that has accrued since the last coupon payment, while dirty price, also called the full or invoice price, is the clean price plus that accrued interest — the actual cash amount a buyer pays to settle a Singapore Government Securities or corporate bond trade.
Not financial advice. All figures for educational reference only. Data as at July 2026.
Key Takeaways
- Bond prices quoted on trading platforms, whether for SGS bonds, corporate bonds, or bond ETFs, are almost always clean prices, making it easy to compare bonds issued or last traded on different dates.
- The dirty price is what actually changes hands on settlement day — it always includes the accrued interest owed to the seller for the days they held the bond since the last coupon date.
- Accrued interest is calculated using a day-count convention, commonly Actual/365 for Singapore Government Securities, based on the exact number of days elapsed since the last coupon payment.
- Clean price and dirty price converge to the same figure on each coupon payment date, when accrued interest resets to zero, and diverge most just before the next coupon is due.
- Retail investors buying Singapore Savings Bonds don’t encounter this distinction directly, since SSBs are non-tradable and redeemed at par — clean versus dirty pricing mainly matters for SGS bonds and corporate bonds traded on the secondary market.
What Are Clean Price and Dirty Price?
When a bond trades between two coupon payment dates, the seller has technically “earned” a portion of the next coupon simply by holding the bond since the last payment, even though the coupon hasn’t been paid out yet. Bond market convention handles this with two related prices.
The clean price strips out this accrued interest, showing only the bond’s price movement due to changes in credit quality, interest rate expectations, or market demand — this is the number you’ll see quoted on a screen or in a newspaper table, and it’s what allows investors to meaningfully compare a bond’s price today with its price a month ago.
The dirty price adds the accrued interest back in, producing the actual total amount the buyer must pay the seller to settle the trade. It’s called “dirty” simply because it mixes two different things — the underlying price movement and the accrued coupon — into a single number.
How the Calculation Works in Singapore
| Component | Formula / Description |
|---|---|
| Accrued Interest | Coupon Rate × Face Value × (Days Since Last Coupon / Days in Coupon Period) |
| Dirty Price | Clean Price + Accrued Interest |
| Day-count convention (SGS) | Typically Actual/365, counting exact calendar days elapsed |
| When they’re equal | On the coupon payment date itself, when accrued interest is zero |
Source: Monetary Authority of Singapore SGS bond conventions; standard global fixed income market practice.
Clean vs Dirty Price Example
An investor buys a Singapore Government Security bond with a 2.5% annual coupon, 60 days after the last coupon payment, out of a 182-day coupon period.
- Quoted (clean) price: S$101.20 per S$100 face value
- Accrued interest: 2.5% × S$100 × (60/182) ≈ S$0.82
- Dirty price actually paid at settlement: S$101.20 + S$0.82 = S$102.02 per S$100 face value
The buyer pays the extra S$0.82 to compensate the seller for the interest the seller has earned by holding the bond over those 60 days, and the buyer will recoup it when they receive the full coupon at the next payment date.
Advantages of Understanding Clean vs Dirty Price
- Accurate cost comparison. Using clean prices lets you compare a bond’s valuation over time without accrued interest distorting the picture.
- No surprise on settlement. Knowing the dirty price includes accrued interest prevents confusion when your actual cash outlay is higher than the quoted price.
- Better yield calculations. Yield-to-maturity and other return metrics are calculated using the dirty price, since that’s the real amount invested.
- Useful when trading near ex-coupon dates. Understanding accrued interest helps you judge whether buying just before or after a coupon date changes your effective entry cost.
Risks and Limitations
- Easy to misread a quote. Investors unfamiliar with the convention may assume the clean price is their total cost, then be surprised by the dirty price on their contract note.
- Day-count conventions vary. Different bond markets and instrument types use different day-count rules, which can trip up investors comparing SGS bonds with foreign or corporate bonds.
- Doesn’t apply to all retail instruments. Singapore Savings Bonds and most fixed deposits don’t use this pricing convention, so the concept mainly matters for secondary-market bond trading.
- Tax and accounting treatment. Accrued interest received or paid can have specific tax and accounting implications that differ from capital gains on the clean price movement.
Clean Price vs Dirty Price
| Feature | Clean Price | Dirty Price |
|---|---|---|
| Includes accrued interest? | No | Yes |
| What you see quoted | Yes, standard market quote | No, usually not directly quoted |
| What you actually pay to settle | No | Yes |
| Useful for | Comparing price trends over time | Calculating actual cash flow and yield |
| Equal to each other | Only on coupon payment dates | Only on coupon payment dates |
The Bottom Line
For Singapore bond investors, the clean price is the number to watch for tracking value over time, but the dirty price is the number that actually leaves your bank account on settlement day — understanding both prevents confusion when a bond’s contract note shows a higher figure than the price you saw quoted.
Frequently Asked Questions
What is the difference between clean price and dirty price for a bond?
Clean price excludes accrued interest since the last coupon payment, while dirty price includes it — the dirty price is the actual amount a buyer pays to settle the trade.
Why is it called the dirty price?
It’s called dirty because it combines two separate things — the bond’s underlying price movement and the accrued interest owed to the seller — into a single settlement figure.
Do Singapore Savings Bonds use clean and dirty pricing?
No, Singapore Savings Bonds are non-tradable and redeemed at par, so this pricing distinction mainly applies to secondary-market instruments like Singapore Government Securities bonds and corporate bonds.
How is accrued interest calculated for SGS bonds?
It’s typically calculated using an Actual/365 day-count convention, multiplying the coupon rate by the face value and the proportion of days elapsed since the last coupon payment.
When are clean price and dirty price the same?
They are equal only on the coupon payment date itself, since accrued interest resets to zero right after a coupon is paid out.
Which price is used to calculate a bond's yield to maturity?
The dirty price is used, since it represents the actual amount invested at settlement, which is necessary for an accurate yield calculation.