What’s a dated date?

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Dated date is a term that has to do with the terms and conditions associated with various types of debt instruments and other securities. The accrual of interest is the factor that defines this type of date. A dated date is simply the date that earning of interest on the investment begins to take place.

In some cases, the issue date for a given bond or security issue and the dated date will be the same. However, this does not have to be the case. Depending on the terms associated with the investment, the dated date may occur sometime after the point of issue.

The use of a dated date is very common with any type of fixed income security. In the actual function, the investor or buyer makes a payment to the underwriter or issuer of the bond or debt instrument in question for any interest that has been earned between the settlement date and the date dated. At the same time, the buyer also pays the face value of the debt instrument. The insurer in turn reimburses this amount as part of the first interest payment that is returned to the buyer.

A dated date is not unusual for any type of bond issue. This is true with corporate and municipal bond issues. This arrangement tends to provide the issuer with more revenue from the bond issuance on the front-end. Since bonds are often issued as a means of financing projects, this is also in the best interest of the long-term investor. Presumably, the issuer can successfully complete the project on time if financing is in place and be in a position to make interest payments to investors on time.

While it may seem like the investor is paying more up front, the date-dated interest payment is usually paid early in the life of the bond. This means that the investor does not have to endure a long period of time before recovering that payment for the interest accrued between the settlement date and the date dated. Meanwhile, interest continues to be earned on the investment, so the investor is earning a return for his efforts.

Since bonds are considered a relatively safe type of investment, date dating is one more way for the investor to create a guarantee of income that will be received at some future date. In most cases, the interest payment calculated to cover the period between the date of purchase and the date dated does not create difficulties for the investor. Issuers can project the fixed amount of interest that will accrue between the dated date and the purchase date in advance, so the investor always knows the amount of the financial obligation in advance.

Smart Asset.

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