DEFINITION of 'Yield Basis'

A method of quoting the price of a fixed-income security as a yield percentage, rather than in dollars. This allows bonds with varying characteristics to be easily compared.

BREAKING DOWN 'Yield Basis'

Unlike stocks, which are quoted in dollars, most bond quotes include a yield %. For example, Corp. ZZZ is listed with a 6.75% coupon, a Sept 04/20 maturity, has a dollar value of 94.00 and a yield of 9%.


This bond quote tells a bond trader that the bond is currently trading at a discount because its yield basis (9%) is greater than its coupon rate (6.75%). A bond trader could then compare the bond to others within a certain industry.

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RELATED FAQS
  1. What is the most common solvency ratios used in fundamental analysis?

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  2. How does a bond's coupon interest rate affect its price?

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  3. What is the difference between yield to maturity and the coupon rate?

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  4. What causes a bond's price to rise?

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  5. Should investors focus more on the current yield or face value of a bond?

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  6. If I buy a $1,000 bond with a coupon of 10% and a maturity in 10 years, will I receive ...

    Simply put: yes, you will. The beauty of a fixed-income security is that the investor can expect to receive a certain amount ... Read Answer >>
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