MATLAB: Difference in values obtained from BNDYIELD in MATLAB and YIELD in EXCEL

MATLAB

'BNDYIELD 'is a function that calculates the yield to maturity for a fixed-income security. Let's take an IBM bond as an example. The CUSIP '459200JG7' refers to a (almost 10 year to maturity from today) IBM corporate bond with the following characteristics:
Coupon: 3.45% Maturity: 02/19/2026 Day Count: 30/360 Coupon Frequency: Semi-Annual No Odd Coupons (Last or First)
Let's say that I'm purchasing this bond today for a settlement Date (t+3) of May 10th, 2016. Let's say that I am purchasing this Bond at a price of $106.8125 and assuming a redemption (par) amount of $100, I would like to know what is the yield of maturity I am getting.
If I use the bndyield formula in MATLAB:
Yield = bndyield(106.8125,0.0345,'05/10/2016','02/19/2026','Period',2,'Basis',1)
I get a result of 0.026530631026615 or 2.6531% yield (rounded up)
Using an Excel formula of YIELD…
=YIELD("5/10/2016","02/19/2026",0.0345,106.8125,100,2,0)
…and using the same inputs, I get the following result:
0.0265385150 or a yield of 2.6539%.
The 'BNDYIELD' in MATLAB and YIELD function in Excel generate different values for same set of parameters.

Best Answer

The issue here is the optional input argument DiscountBasis in the function BNDYIELD. The default for this optional input argument is to use actual/actual for SIA bases. Here is the description of this optional input argument:
 
DiscountBasis - Basis used to compute the discount factors for
                    computing the yield.  The default behavior is for SIA
                    bases to use the actual/actual day count to compute
                    discount factors, and for ISMA day counts and BUS/252
                    to use the specified basis.
 
It seems like Excel uses the same basis for discounting and generating cash flows.  We get a similar answer when calling  BNDYIELD with this optional argument.
 
>>Yield = bndyield(106.8125,0.0345,'05/10/2016','02/19/2026','Period',2,'Basis',1, 'DiscountBasis',1)
 
 Yield =
     0.026538515006546
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