Bond Yield
The return an investor earns on a bond, expressed as an annual percentage.
Bond Yield
Bond yield measures the return you receive from a bond investment. There are several types of yield to understand.
Types of bond yield
Current yield
Annual coupon payment ÷ current market price. Simple but incomplete.
Yield to Maturity (YTM)
Total return if held to maturity, accounting for coupon payments, purchase price, and time to maturity. The most comprehensive measure.
Yield to Call (YTC)
Return if the bond is called (redeemed early by the issuer) at the first call date.
Yield and price relationship
- Inverse relationship: When bond prices rise, yields fall (and vice versa)
- This is the fundamental concept of bond investing
What drives bond yields
- Federal Reserve interest rate policy
- Inflation expectations
- Credit risk of the issuer
- Supply and demand for bonds
- Economic growth outlook
Why it matters for stock investors
Bond yields compete with stock returns. When yields rise significantly, money may flow from stocks to bonds, creating downward pressure on equity prices.
Key Takeaways
- Context matters when interpreting any financial metric.
- Combine multiple data points for informed decisions.
- Continue learning to build investment knowledge.
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Where You'll See This
This concept appears throughout stock detail pages and financial data.