What is the days counting methodology for municipal and corporate bonds?

The days counting methodology for municipal and corporate bonds, known as the 30/360 method, is widely used for calculating accrued interest. This method assumes that each month has 30 days and each year has 360 days, which simplifies the calculations related to interest payments and settlement dates.

By using the 30/360 approach, bondholders can easily determine the exact amount of interest that has accrued from the last coupon date to the sale or settlement date. This methodology is particularly advantageous in the bond market as it standardizes calculations across various agreements, making it easier for both buyers and sellers to understand interest calculations without needing to account for the actual number of days in each month or the total number of days in a year.

The other methodologies listed, such as Actual days/365, 60/360, and 30/365, do not align with the established practice for municipal and corporate bonds regarding interest calculations in the market. Each of these alternatives has specific applications in other contexts or types of agreements, but the 30/360 method remains the standard for bonds.