Actual/366: Definition & Meaning | Bondfish
Actual/366 is a day count convention that calculates interest by dividing the actual number of days elapsed in a period by a 366-day year.
What it means
Day count conventions define how calendar time converts into interest. Actual/366 counts the actual days in the accrual period and uses 366 as the fixed denominator — the mirror image of Actual/365F, which always uses 365.
It is one of the rarest conventions in practice. You may encounter it in a few domestic money markets and legacy systems, and some documentation uses “Act/366” loosely as a label for leap-year variants such as Actual/365L. When a term sheet says Actual/366, read the definition clause carefully — the exact rule matters more than the label.
Why it matters for bond investors
Because the denominator is larger, Actual/366 produces a slightly lower daily interest accrual than Actual/365 conventions — about 0.27% less per day of accrual. Over a full 365-day year an instrument accrues only 365/366 of its nominal rate. For a retail investor, the practical takeaway is simple: the day count changes accrued interest and effective yield, so never compare two instruments’ quoted rates without checking their conventions.
Example
Interest = Principal × Rate × (Actual days / 366)
$10,000 at 5% for 92 days: 10,000 × 0.05 × 92/366 = $125.68
(vs. $126.03 under Actual/365F)
Related terms
This definition is for general information only and is not investment advice. Bond investing involves risk, including possible loss of principal.