I'm interested in using the YIELD() function in Excel to compute the yield of an Italian government bond. The bond in question is:

0.750% 15-January-2018

Italian government bonds have special pricing conventions. According to http://help.derivativepricing.com/1311.htm, yields are calculated using annual compounding even though coupons are semi-annual.

According to http://help.derivativepricing.com/1298.htm, the final period yield method is "compound yield".

If we price the bond at 100 and settle the bond on 12-January-2018 (a few days before the maturity date), is it possible to hack the YIELD() function in Excel to solve for a yield of 0.746739%, as in the second screen print below?

enter image description here

enter image description here


  • $\begingroup$ In this govt document (in English) the formula for yield is given on page 19 and an example on page 22. Basically it is actual/365 day count and $P=CF_1 (1+y)^{-t1}+\cdots+CF_n (1+y)^{-tn}$ so it is very simple and standard dt.tesoro.it/export/sites/sitodt/modules/documenti_en/… $\endgroup$
    – nbbo2
    Dec 21, 2017 at 15:31
  • $\begingroup$ Thank you. Is it just Actual/365 in the final period? Also, importantly, can we use the YIELD() function in Excel to compute this? $\endgroup$
    – equanimity
    Dec 21, 2017 at 15:58
  • 1
    $\begingroup$ The standard day count convention for BTPs (fixed coupon bonds) is Actual/Actual. The screenshot you took actually lists this. $\endgroup$
    – Helin
    Dec 22, 2017 at 0:36

1 Answer 1


Unfortunately, the answer is no. As you have mentioned, Italian BTPs pay semi-annual coupons, but the discount frequency for yield is annual. The price-yield formula is therefore:

$$ P + AI = \frac{c/f}{(1 + y/f')^{t_0 f'}} + \cdots + \frac{100 + c/f}{(1 + y/f')^{t_nf'}}, $$ where $f = 2$ and $f'=1$.

The YIELD function in Excel can only handle scenarios where $f = f'$.


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