A convention for calculating yield on a debt security (T-bill, bond, note, etc) that assumes settlement of trade is made one business day before the usual settlement date. For example, a trade that usually requires next-day settlement would call for payment and delivery two business days after the trade date. That is, settlement takes place not the next business day but the business day after. Usually, small trades by retail customers of such debt securities are executed on skip-day settlement. As of late, money market instruments have also been traded likewise.
According to skip-day settlement, yield on a T-bil sale is calculated assuming settlement would not take place until two days after quotation of the T-bill price. In other words, regular settlement in Treasuries is one business day, so a skip-day settlement would be two business days.
