Yield Basis

Written By
Paul Tracy
Updated November 4, 2020

What is Yield Basis?

Yield basis refers to the act of quoting bond prices in terms of yield percentages rather than in dollars.

How Does Yield Basis Work?

Let's assume Company XYZ has $20,000,000 in bonds outstanding that pay 5% interest per year (or $50 per $1,000 bond). If the bonds are trading at $900 apiece, then the yield basis is:

$50/$900 = 0.0555 or 5.55%

Why Does Yield Basis Matter?

Yield basis is useful for easily comparing bond characteristics. Though dollar prices are helpful, they don't take into account the other characteristics of a bond.

In particular, the yield basis indicates whether a bond is trading at a discount or a premium. If the yield basis is greater than the coupon rate, the bond is trading at a discount; if the yield basis is lower than the coupon rate, the bond is trading at a premium. Thus, bonds are generally quoted on yield basis, particularly Treasurys.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Yield Basis.
Be the first to ask a question

If you have a question about Yield Basis, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Yield Basis, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Yield Basis

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms