Bond Equivalent Yield (BEY)

Bond equivalent yield (BEY) is a standardized yield calculation that expresses a bond's return on an annualized semiannual basis, enabling apples-to-apples comparison between bonds with different coupon payment frequencies. The convention arose because most U.S. bonds pay interest semiannually, so BEY doubles the semiannual yield to arrive at an annual figure. For discount securities like Treasury bills that don't pay coupons, BEY converts the discount yield to a coupon-equivalent yield for comparison with coupon-bearing bonds. The formula for T-bills is: BEY = (Face Value - Purchase Price) / Purchase Price × (365 / Days to Maturity). BEY differs from effective annual yield (EAY) because it does not account for compounding — it simply annualizes the periodic return. This makes BEY slightly understate the true annual return but provides a consistent comparison standard across the U.S. bond market.