Bond-equivalent yield (BEY)

Definition

Bond-equivalent yield (BEY) in plain English

Different bonds pay interest on different schedules, which makes their advertised yields hard to compare fairly — it's like comparing one job's monthly salary to another's weekly wage without converting them. Bond-equivalent yield fixes that by quoting every yield as if the interest compounds twice a year (semiannually), the standard rhythm for U.S. bonds. Putting everything on that same twice-a-year basis lets you line up bonds side by side and know you're comparing apples to apples. So when you see BEY, just read it as 'the yield, stated the normal bond way,' so it's directly comparable.

Learn these first

• Coupon rate

Practice Bond-equivalent yield (BEY)

When converting a discount-basis yield to a bond-equivalent yield (BEY), why is the BEY generally higher?

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