Yield Basis
Yield basis identifies how a bond is quoted and its yield calculated, including redemption date, compounding, day count, price, and settlement assumptions.
Bond-yield comparisons align quote conventions and tax treatment before weighing additional yield against credit, duration, call risk, and trading costs.
Bond-yield comparisons start with what each percentage measures. A coupon rate, a yield to maturity, and a tax-adjusted yield can describe different aspects of the same investment rather than competing returns.
Yield basis explains quotation conventions, redemption dates, compounding, and price inputs. Once those are aligned, yield pickup measures the additional yield available from an alternative holding, while keeping costs and risk differences visible.
For taxable-versus-exempt comparisons, tax-equivalent yield adjusts for a stated tax assumption. It does not equalize credit quality, maturity, liquidity, or call terms. The yield gap extends the comparison to specified equity and bond yields, which have different cash-flow and risk characteristics.
A higher percentage is not automatically a better investment. Compare the same pricing date, currency, and yield convention, then consider what additional risks or restrictions accompany the apparent advantage.
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Yield basis identifies how a bond is quoted and its yield calculated, including redemption date, compounding, day count, price, and settlement assumptions.
Yield gap compares a stated equity yield with a stated bond yield. Learn both sign conventions, worked examples, inputs, uses, and limitations.
Yield pickup is the extra quoted yield from an alternative investment, measured on a consistent basis and weighed against costs, taxes, and additional risk.