Bank Discount Basis
Definition of 'Bank Discount Basis'A quoting convention used by financial institutions when quoting prices for fixed-income securities sold at a discount, particularly U.S. Government issues. The quote is presented as a percentage of face value, and is determined by discounting the bond by using a 360-day-count convention, which assumes there are twelve 30-day months in a year.Also referred to as "discount yield". |
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Investopedia explains 'Bank Discount Basis'Differences in the day count convention used by the firm quoting a fixed-income security is subtle, but important. Over longer maturities, the day count convention will have a greater impact on the current 'price' of a bond than if the time to maturity is much shorter.The 30/360 day-count convention is the standard when quoting government treasury bonds for banks. |
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