Understanding Yield
The yield listed on the trade confirmation will typically be the same yield that was quoted to the customer. The yield must be included on a customer confirmation for a Build America Bond (BAB), as well as other standard tax-exempt municipal bonds.
Yield disclosure is not required for bonds sold at par, since the yield to maturity is simply the same as the coupon rate. In addition, no yield calculation is required for the following:
- • Municipal fund securities
- • Variable rate bonds, because the coupon rate is periodically reset, so calculation is not possible
- • Bonds in default, because they are no longer paying interest
- • Securities traded on a discounted basis
- • Municipal CMOs
The yield on the confirmation will be the lower of the yield to maturity, yield to call, or yield to put. This lower yield is often referred to as