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FX Swap Implied Yield from Spot and Forward Quotes

Article Quant Q&A · Author: Student
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Summary

The document asks how to reproduce a one-year euro implied yield shown by a Bloomberg terminal from a spot exchange rate, a forward exchange rate, and a US dollar yield. It presents the relationship used for the calculation: the spot bid divided by the forward bid, multiplied by one plus the dollar yield, then minus one. Applying the displayed inputs gives a result that differs slightly from the terminal figure.

The response points the reader to Bloomberg’s help manual, which it says includes spreadsheet examples of these calculations. It does not explain whether the discrepancy comes from quote precision, day-count conventions, compounding, or another market convention, and it provides no independent calculation or resolution. The useful takeaway is the covered-interest style relationship and the need to consult the terminal’s detailed calculation conventions when reproducing an implied yield from quoted FX swap data.

Key ideas

  • An implied euro yield can be calculated from spot and forward exchange rates together with a dollar yield.
  • The document compares the formula’s output with a terminal quote and observes a small difference.
  • The response recommends checking Bloomberg’s calculation documentation for spreadsheet-level details.
  • The discrepancy is left unresolved, with no analysis of precision or market conventions.

Tags

ForexFixed income
Full text
# FX swap implied yield from bloomberg


# FX swap implied yield from bloomberg












I am trying to reproduce the bid EUR implied yield I see in the screenshot below for 1y tenor which is -0.6226%.

EUR implied yield bid = spot_bid/fwd_bid *(1+i_USD_bid) - 1

Inputs from BBG terminal:

1y USD yield bid = 0.1962%

1y fwd_bid = 1.204757

spot bid = 1.1949

EUR implied yield bid = 1.1949/1.204757*(1+0.1962%) - 1 = -0.6236% which is different from -0.6226% I see on the terminal. Is this just rounding or I am missing anything?

## Answer by user35980 (score 4)

https://quant.stackexchange.com/a/61844

I believe there's a Bloomberg manual in the help function which explicitly shows these calculations in a spreadsheet, very useful:

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.