Bond Yield
The return a bond generates, expressed as an annual percentage of the price paid for it.
Formula
Yield varies by measure: Current Yield = Annual Coupon / Market Price; Yield to Maturity accounts for all cash flows and the redemption amount
Unit
%
In depth
Yield moves inversely to price, which is the central relationship in fixed income: a bond's future cash flows are fixed, so paying less for them raises the return and paying more lowers it. Several yield measures exist and they answer different questions, so the measure must be named — current yield ignores the redemption amount entirely, while yield to maturity includes it. Rising yields mean falling prices, so news that yields have risen is news that existing bondholders have lost money. The relationship confuses newcomers because a higher yield sounds like good news, and for a holder it is precisely the opposite.
Worked example
A ₹1,000 bond with an 8% coupon bought at ₹950 yields 80 / 950 = 8.42% currently. If yields in the market rise so the price falls to ₹900, the current yield becomes 8.89% and the existing holder has lost ₹50.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Bond Yield” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.