Clean Price

The clean price is the quoted market price of a bond that excludes accrued interest — it reflects only the bond's principal value based on its coupon rate, credit quality, maturity, and prevailing interest rates. In the United States and most global bond markets, bonds are quoted using clean prices to allow straightforward comparison between bonds regardless of where they fall in the coupon payment cycle. However, the actual amount a buyer pays is the dirty price (clean price plus accrued interest). For example, if a bond's clean price is $980 and it has $15 of accrued interest, the buyer pays $995 (the dirty price). The distinction matters because accrued interest changes daily, so using clean prices prevents artificial price fluctuations in quotes that would occur simply because interest is accumulating. Between coupon dates, the dirty price gradually rises as interest accrues, then drops by the coupon amount on the payment date, while the clean price moves more smoothly.