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Equivalent Yield Calculations

Given the wide range of alternative pricing conventions used across the sovereign bond markets, a number of alternative yield measures are produced for every bond in order to allow a consistent basis for comparison. All of the different yield measures are listed and defined in the following table:

 

Yield Type

Definition

 

Domestic Yield

The yield to maturity based on the domestic market pricing conventions for the bond under consideration. For the "_Price" functions, this value will be supplied by the user.

Annual Compounded

The yield to maturity based on domestic conventions and assuming annual compounding. If annual compounding is standard for the given bond, then this value will be the same as that given for the domestic yield. If the bond under consideration has only one coupon payment outstanding and final period pricing uses money market yields, then the quoted domestic yield is converted to an annual compounding equivalent (see money market yield).

Semi-Annual Compounded

The yield to maturity based on domestic conventions and assuming semi-annual compounding. If semi-annual compounding is standard for the given bond, then this value will be the same as that given for the domestic yield. If the bond under consideration has only one coupon payment outstanding and final period pricing uses money market yields, then the quoted domestic yield is converted to a semi-annual compounding equivalent (see money market yield).

Quarterly Compounded

The yield to maturity based on domestic conventions and assuming quarterly compounding.If quarterly compounding is standard for the given bond, then this value will be the same as that given for the domestic yield. If the bond under consideration has only one coupon payment outstanding and final period pricing uses money market yields, then the quoted domestic yield is converted to a quarterly compounding equivalent (see money market yield).

Monthly Compounded

The yield to maturity based on domestic conventions and assuming monthly compounding. If monthly compounding is standard for the given bond, then this value will be the same as that given for the domestic yield. If the bond under consideration has only one coupon payment outstanding and final period pricing uses money market yields, then the quoted domestic yield is converted to a monthly compounding equivalent (see money market yield).

True Yield

True yields are computed based on a cash flow stream that has been adjusted for the actual payment dates. That is, each scheduled coupon payment is discounted back from the actual payment date based on the selected business day convention and the relevant holiday schedule provided by the user. If there is no business day adjustment, the true yield will not differ from the domestic yield.

U.S. Street

The convention used by market participants in the U.S. to value treasuries. Based on an accrual basis of Actual/Actual and assumes that yields are compounded semi-annually, even in fractional first periods (compare with the U.S. Treasury method). If the bond is in its final coupon period, then the US Street yield is computed using the US market final period pricing convention (see money market yield).

U.S. Treasury

The convention used by the U.S. Treasury to value bonds. Based on an accrual basis of Act/Act and assumes that yields are compounded semi-annually in all but the fractional first period. If the bond is in its final coupon period, then the US Street yield is computed using the US market final period pricing convention (see money market yield).

JGB Simple

Yield based on the JGB pricing methodology.

Money Market (Act/360)

The yield to maturity based on the simple interest formula. The length of all accrual periods is based on a 360 day year.

Money Market (Act/365)

The yield to maturity based on the simple interest formula. The length of all accrual periods is based on a 365 day year.

 

In This Section

Converting Money Market Yields

Computing the US Treasury Equivalent Yield

Computing Remaining Equivalent Yields

Computing the True Yield

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