hard · Debt Capital Markets bond-instruments-structures

For an investor focused on realized yield, why does the short-first-coupon structure, when both are priced to the same yield-to-maturity, leave the investor economically equivalent rather than advantaged or disadvantaged?

1. The first coupon is reduced pro-rata for the shortened accrual period, so the smaller initial cash flow exactly offsets the shorter time it is discounted, leaving YTM and price internally consistent and the investor neutral
2. The short first coupon pays a full 6-month coupon over less than 6 months, boosting the investor's realized yield above the quoted YTM, so the structure is a hidden advantage
3. The shortened period means the investor forgoes accrued interest, so at equal YTM the short-first-coupon bond must be cheaper, transferring value to the investor at settlement
4. Because day-count conventions round the short stub up to a full period, the bond effectively pays an extra fractional coupon, modestly lowering the issuer's all-in cost

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