I bought a bond on BondScanner and I noticed the amount deducted from my bank was higher than the listed price. They said it’s for ‘accrued interest.’ Is that normal?
Yup, totally normal. Bonds pay interest on a regular schedule, but that interest accumulates every day in between payments. When you buy a bond mid-cycle, you’re paying the previous owner for the interest they’ve earned. That’s why the price you pay includes the interest from the last coupon date until the day you bought it.
Oh, so when I paid more I wasn’t getting charged extra? I was just paying for the interest the seller earned. Got it!
Exactly. You’ll get that interest back on the next coupon date. It’s just part of how bonds settle.