bond equivalent yield

bond equivalent yield
An annual yield, expressed as a percentage, describing the return provided to bond holders. A bond equivalent yield is double the simple interest, semiannual yield. Since Treasury and agency notes and bonds, as well as most corporate and municipal bonds, pay interest semiannually, the bond equivalent yield is a way to compare yields available from discount securities such as Treasury bills and BAs with yields available from coupon securities. From that usage, this yield measure is also known as the coupon yield equivalent or the equivalent bond yield. For securities that pay daily, monthly, or quarterly interest, the bond equivalent yield understates the benefits obtained from the compounding of income. American Banker Glossary
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bond yield calculated on an annual percentage rate method. Differs from annual effective yield. Bloomberg Financial Dictionary

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   A calculation that converts the yield of a money market instrument, such as a Treasury bill, into the equivalent yield of a Treasury bond in order to compare efficiency. Yields on Treasury bills are expressed as a discount from face value and their maturity is often less than a year, so a calculation is needed to convert their yield into the equivalent annual yield of a bond.
   ► See also Money Market.

Financial and business terms. 2012.

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