What is the meaning of taxable equivalent yield (TEY)?

taxable equivalent yield (TEY) is the yield that a tax-free investment would provide to an investor if the tax-free yield was "grossed up" by the amount of taxes not paid. This is the most common way of comparing yields on taxable and tax-free investments. Instead of reducing a taxable yield by the amount of applicable taxes to compare it with a tax-free yield, the tax-free yield is increased by a hypothetical amount of income tax.