Understanding Bond Market Prices: Clean vs Dirty Prices

A bond’s market price is shaped by its interest payments, repayment date, currency, credit quality and the yields available on similar bonds. Bond prices may be quoted as clean or dirty. A dirty price includes accrued interest and the present value of future cash flows. A clean price excludes accrued interest. New bonds are usually issued close to their nominal value, less issuance fees. Over time, a bond can trade above par when market interest rates fall, or below par when rates rise or investors perceive a higher risk of default.

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