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The dated date is a term that has to do with the terms and conditions associated with various types of debt instruments and other securities. Interest accrual is the defining factor with this type of date. A dated date is simply the date that the earning of interest on the investment begins to take place.
In some cases, the issue date for a given bond or securities 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 at some point after the point of issuance.
The use of a dated date is very common with any type of fixed-income security. In 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 was earned between the settlement date and the dated date. At the same time, the buyer also pays for the face value of the debt instrument. The underwriter in turn reimburses this amount as part of the first interest payment that is made back to the buyer.
A dated date is not unusual for any type of bond issue. This is true with both corporate and municipal bond issues. This arrangement tends to supply the issuer with more revenue from the bond issue on the front end. Since bonds are often issued as a means of financing projects, this is also in the best interests of the investor in the long term. Presumably, the issuer can successfully complete the project on schedule if the funding is present and be in a position to meet interest payments to investors on time.
While it may appear that the investor is paying more on the front end, the interest payment based on the dated date 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 recouping that payment for interest accrued between the settlement date and the dated date. In the interim, interest is continuing to be earned on the investment, so the investor is realizing a return for his or her efforts.
Since bonds are considered a relatively safe type of investment, the dated date is one more way that the investor creates an assurance of revenue that will be received at some future date. In most cases, the interest payment calculated to cover the period between the purchase date and the dated date does not create any hardship 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 up front financial obligation.
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