BEY vs. YTM

F

fh2763

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
Can someone clarify this one for me, it just does not make any sense to me.
Is the BEY the same as the YTM? What is the significance of converting the annual pay to the BEY?
Thanks.
 
Hi,
BEY or Bond Equivalent Yield is what is used in the market to describe the yield on a bond. It is calculated by “doubling” the semi-annual yield to maturity.
For example.
YTM is 6%. Therefore the semi-annual YTM is 2.9563%. We can get back to 6% by calculating (1.029563^2)-1
BEY is found by doubling the semi-annual YTM. so 5.9126%
Hope that helps!
 
Soddy- Question for you:
It was my take that the YTM for an annual pay bond was dervied from the following formula.
(2(1+X)^.05)-1
That assumes that X or YTM is for 6 months.
Moreover, BEY is also HPY X 365/t where t is the number of days until maturity.
Am I confusing something?
 
Re: getting BEY from YTM, you need to compound backward to 6 months from the YTM rate and then double this for your BEY.
From your formula (2(1+X)^.05)-1 ; I read this as two times the semi-annual yield to maturity, which is the same as what I was trying to say in my first post. I apologise if I wasn’t clear about it.
HPY X 365/T - Do you mean [(1+HPY)^(365/t)] - 1. If so this the formula for EAY.
 
Gotcha. Yes it’s essentially going to give something similar to just doubling it, but the discounting needs to be taking into consideration.
For that other formula, I was just refering to another BEY calculation
(FV-Price)/Price * 365/t
It’s the Money Market Yield but using 365 instead of 360.
 
According to the formulas. It seems that the BEY is compound semiannually just like how bonds are compounded, they usually pay interest semiannually.
So to get the BEY just have to convert the yield to a semiannual compounding yield, is that correct?
 
BEY = HPY + 360/t, which is the same formula for MMY.
EAY = (1 + HPY)^365/t - 1
No?
 
Sauce says 365 for BEY
EAY is correct so long as HPY matches the period t.
 
Damil4real Wrote:
——————————————————-
> BEY = HPY + 360/t, which is the same formula for
> MMY.
>
> EAY = (1 + HPY)^365/t - 1
>
> No?
attack it bro, attack it
 
You must log in or register to reply here.
Back
Top