30/360 Day Count Convention: Rules, Variants, and Defaults

The 30/360 day count convention calculates interest by treating every month as exactly 30 days and every year as exactly 360 days. Under that rule, a $100,000 loan at 5% accrues $416.67 in every month, whether the calendar month has 28, 30, or 31 days, because the daily rate is a flat one-360th of the annual rate. It is the default day count for U.S. corporate bonds, municipal bonds, and agency mortgage-backed securities, and knowing how it works is what lets you verify accrued interest, check a payoff, or compare fixed-income quotes on equal terms.¹

The Formula and a Worked Example

A day count convention is the rule for turning two calendar dates into the fraction of a year used in an interest calculation. Under 30/360, the number of days between a start date and an end date is:¹

Days = (Y2 − Y1) × 360 + (M2 − M1) × 30 + (D2 − D1)

Y1, M1, D1 are the start date’s year, month, and day. Y2, M2, D2 are the end date’s. Once you have the day count, interest follows directly:

Interest = Principal × Annual Rate × (Days ÷ 360)

Take a $100,000 bond with a 5% coupon and calculate accrued interest from January 15 to March 5 of the same year. The year term drops out. Months: 3 − 1 = 2. Days: 5 − 15 = −10. Total: (2 × 30) + (−10) = 50 days. Accrued interest is $100,000 × 0.05 × (50 ÷ 360) = $694.44.

The formula handles periods that cross a year end without any special work. From November 20 to February 10 of the next year: (1 × 360) + (2 − 11) × 30 + (10 − 20) = 360 − 270 − 10 = 80 days. Because every month is standardized to 30, the arithmetic stays clean.

Adjustments for the 31st and for February

Before you drop dates into the formula, a couple of them may need adjustment. This is where the different flavors of 30/360 diverge. Under the standard U.S. version, known as 30/360 Bond Basis, two rules apply:

If the start date is the 31st, change D1 to 30.
If the end date is the 31st, change D2 to 30 only if the start date was already the 30th or 31st.

That second rule trips people up. A period from March 15 to May 31 keeps D2 at 31, because the start date was not the 30th or 31st. A period from March 31 to May 31 adjusts both: D1 becomes 30, and D2 becomes 30.²

February is easier than it looks. Under 30/360, February is treated as a 30-day month for accrual purposes. A period from January 1 through the last day of February produces a day count of 60, regardless of whether that last day is the 28th or the 29th. Leap years have no effect on the calculation.

The Main Variants of 30/360

Several versions of 30/360 exist, and they can produce different day counts for the same two dates. The differences all sit in how month-end dates are adjusted.

30/360 Bond Basis (30/360 US). The standard U.S. convention. D2 is changed to 30 only when D2 is 31 and D1 was already 30 or 31. Used for most U.S. corporate and municipal bonds.²
30E/360 (Eurobond Basis). Both D1 and D2 change to 30 whenever they equal 31, with no condition on the other date. This was the standard for non-U.S. straight bonds issued before 1999.²
30E/360 ISDA. Like the Eurobond version, and also converts the last day of February to the 30th. The basic 30/360 and 30E/360 variants do not make an explicit February adjustment.

For most U.S. bond calculations you will use Bond Basis. If a bond indenture or swap confirmation specifies a different variant, the document’s language controls. A one-day difference in a day count can look trivial, but on a large position it moves the accrued interest by a real amount, so it is worth checking the governing agreement rather than assuming.

Where 30/360 Is the Default

The convention dominates several U.S. fixed-income markets. Corporate bonds, municipal bonds, and agency bonds all use 30/360 as the default for accrued interest. The Municipal Securities Rulemaking Board codifies this in Rule G-33, which requires municipal bond accrued interest to be computed on a 30/360 day basis.³

Mortgage-backed securities issued by Fannie Mae and Freddie Mac also use it. Fannie Mae’s servicing guidance states that interest accrues “based upon a 30-day month and a 360-day year.”⁴ Many commercial lenders apply the same convention to keep monthly payments identical across a loan portfolio.

If you are calculating accrued interest on a bond trade, verifying a mortgage payoff, or reconciling a fixed-income portfolio, you are almost certainly working under 30/360 unless the instrument says otherwise.

How 30/360 Differs From Actual/360 and Actual/Actual

Two other conventions come up often. Recognizing what they do helps you catch a calculation done on the wrong basis.

Actual/Actual

Actual/actual counts the real number of days in the interest period and divides by the real number of days in the year, 365 or 366. It is the standard for U.S. Treasury securities. The Treasury notes that yields on all its securities use actual day counts on a 365- or 366-day year basis, not 30/360.⁵ It is the most precise reflection of calendar time, but accruals vary from month to month because months vary in length.

Actual/360

Actual/360 counts the real number of days elapsed but divides by 360. It is standard for money market instruments such as Treasury bills and commercial paper. Because the annual rate is spread over 360 days but applied to 365 real days, this method produces a higher effective annual rate than the stated nominal rate. A stated 6% rate calculated on actual/360 works out to roughly 6.083% over a non-leap year, since the rate is effectively multiplied by 365 and divided by 360.⁶

30/360 avoids that mismatch. Numerator and denominator use the same artificial framework, so twelve months of accrual always add up to exactly one year of interest. Under actual/360 they do not, and that is where borrowers sometimes get an unwelcome surprise on their statements.

Disclosure Rules and Dollar Impact

When a lender uses a daily rate based on a 360-day year, federal disclosure rules kick in. Under Regulation Z, a creditor may disclose a daily periodic rate of 1/360th of the annual rate without further explanation, but only if that rate is actually applied for just 360 days per year. If the lender applies the 1/360 daily rate to all 365 days, the creditor must disclose that fact and must report the true annual percentage rate, which will be higher than the nominal rate.⁶ The practical check: compare the stated rate against the disclosed APR. If the APR runs noticeably higher, the lender is likely using actual/360 rather than 30/360.

The dollar impact is not theoretical. On a $500,000 commercial loan at 6%, switching from 30/360 to actual/360 adds roughly $41.67 of interest over a full non-leap year, a 1.389% increase in total interest. That gap compounds across a multi-year term and across a portfolio.

One boundary worth flagging: the IRS does not require 30/360 for tax reporting of interest income. For original issue discount on bonds, IRS Publication 1212 prescribes calculations based on the actual number of days in each accrual period rather than a 30-day-month assumption.⁷ The day count you use for trading and accrual can therefore differ from the method required for tax reporting, which matters when you reconcile investment income between brokerage statements and tax forms.

When you review a loan agreement or bond indenture, find the day count convention in the interest-calculation section before you sign or model the cash flows. If the document specifies 30/360, every month will produce the same interest figure. If it specifies actual/360, expect an effective rate a shade above the stated one. If it specifies actual/actual or actual/365, the interest will track the calendar exactly. Pinning this down at the outset is what keeps later reconciliations quiet.

1
Municipal Securities Rulemaking Board. Day Counting: Securities Dated on the 15th of a Month
2
ISO 15022. ISO 15022 Data Field Dictionary
3
Municipal Securities Rulemaking Board. Rule G-33 Calculations
4
Fannie Mae Multifamily Guide. 30/360 Interest Calculation Method
5
U.S. Department of the Treasury. Interest Rates – Frequently Asked Questions
6
eCFR. 12 CFR Part 226 – Truth in Lending (Regulation Z)
7
Internal Revenue Service. Guide to Original Issue Discount (OID) Instruments