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Yield Beta

Definition

Yield Beta is a fixed income term that measures the sensitivity of an individual bond's yield to the yields of other bonds in the overall market. Mathematically, yield beta is obtained by regressing the yield of one bond over another individual bond's yield or the bond benchmark yield. A related concept is the country beta used in international bond investing. The country beta is also determined through a regression and the portfolio manager is used to adjust the hedging ratio in order to capture differences in the two country's currencies and interest rates. The country beta helps the portfolio manager determine a better hedge.

Using the term Yield Beta :

The yield beta may be used by a bond portfolio manager in order to refine her hedging ratio over time.

Pay Special Attention To :

Like the equity markets, the betas of the bond market may change quickly and without warning; therefore, you must frequently and regularly visit the calculation of your yield beta to ensure you are still properly hedged.

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Related terms

Country Beta