Bond Equivalent Yield (BEY) Calculator
Convert T-bill discount yield to Bond Equivalent Yield (BEY) for apples-to-apples comparison with coupon bonds.
Also converts semi-annual yields to annual BEY.
Bond Equivalent Yield (BEY)
The Bond Equivalent Yield standardizes yields so that investors can compare discount securities (like Treasury bills) with coupon-bearing bonds on a fair, apples-to-apples basis. Without this conversion, comparing a T-bill’s discount yield to a bond’s coupon yield is misleading.
Two common BEY calculations:
1. From a discount security (T-bill, commercial paper):
BEY = [(Face - Price) / Price] × (365 / Days to Maturity)
This converts the purchase discount into an annualized rate using a 365-day year.
2. From a semi-annual yield (bond convention):
BEY = 2 × Semi-annual Yield
Most US bonds pay coupons semi-annually. BEY simply doubles the semi-annual rate to express it as an annual figure — this is the standard bond market convention.
Why the conversion matters:
T-bills are quoted on a bank discount basis:
Discount Yield = [(Face - Price) / Face] × (360 / Days)
This is misleading because:
- It uses face value (not price paid) in the denominator
- It uses a 360-day year instead of 365
BEY corrects both distortions, making T-bill yields comparable to coupon bond yields.
Example:
- 90-day T-bill, face value $10,000, price $9,850
- Discount yield = ($150 / $10,000) × (360/90) = 6.00%
- BEY = ($150 / $9,850) × (365/90) = 6.19%
The T-bill actually yields 6.19% on a bond-equivalent basis — not 6.00%.
When to use BEY:
- Comparing T-bill returns to short-term bonds or CDs
- Evaluating money market instruments
- Translating any semi-annual bond yield into an annual rate