# Yield Basis

## What is ‘Yield Basis’

A way of expressing the price of a fixed-income asset as a yield percentage, rather than in dollars, is known as yield percentage pricing. This makes it possible to compare bonds with a variety of qualities quickly and effortlessly.

## Explaining ‘Yield Basis’

Unlike stocks, which are priced in dollars, most bond quotations are expressed as a percentage of the bond’s yield. For example, the stock Corp. ZZZ is listed with a coupon of 6.75 percent and a maturity date of September 04/20. It has a dollar value of 94.00 and a yield of 9 percent.

When a bond trader sees this statement, he or she knows that the bond is now selling at a discount since the bond’s yield basis (9 percent) is higher than the bond’s coupon rate (6.75 percent ). A bond trader might then compare the bond to others in a certain industry to see how it compares.

## Yield Basis FAQ

### Is basis the same as yield to maturity?

The basis price of a fixed-income security is a method of referring to the price of a fixed-income security that is based on the yield to maturity of the security. The basis price implicitly implies that the investor will reinvest all interest payments and achieve a rate of return equal to the yield to maturity. The basis price is calculated using the yield to maturity.

### Is the basis the current yield?

It is possible to realize the yield basis by expressing the price of a security or bond as a percentage yield. It is possible to determine the yield basis of a bond by dividing the coupon of the bond by the purchase price of the bond. In other words, the yield is calculated on the following basis: Coupon / Purchase Price (this is the current yield formula).

### What is a discount yield basis?

This convention, also known as discount yield, is used by financial institutions to quote prices for fixed-income assets that have been offered at a discount, such as municipal bonds and U.S. Treasury bills, when they are sold at a discount.