Coupons play a vital role for bonds.

They are an important component for investor returns, and from a technical point of view, they impact the difference between the clean and dirty prices of the bond.

But how do bond coupons actually work? For example, what happens when the payment date of a coupon falls on a weekend? How do we divide a 365 day year into two halves for a semi-annual paying bond? For fixed coupon bonds, the answer is relatively straightforward.

The payments of fixed coupon bonds are consistent or constant throughout the bond's life.

This means that for each coupon period, investors receive the same amount of money regardless of external factors, such as leap years or the uneven number of days in different months.

This consistency is a key feature of fixed coupon bonds.

So if a bond makes semi-annual payments, it means investors receive two equal sized coupons per year, while a 365 day year cannot be split exactly in half to allocate an equal number of days to each semi-annual period.

The bonds terms ensure that each of the two annual coupon payments remain identical in amounts.

The cashflow table of a US treasury bond here illustrates it nicely.

Investors receive two payments of $19,375 each year, regardless of the exact number of days in the coupon periods, and while the September 30th payment date fell on a Saturday, no actual payment was made on that date.

Since payment systems don't operate over the weekend, however, from an analyst call perspective, the date is treated as if the payment occurs on the scheduled date of September 30th.

Maintaining consistency in modeling and calculations.