what is a bond yield

A bond yield is the return an investor realizes on a bond, expressed as an annual percentage. It is the return on the capital invested by an investor. Bond yields are different from bond prices, and the two share an inverse relationship. The yield matches the bonds coupon rate when the bond is issued. There are several ways to calculate bond yield, including coupon yield, current yield, and yield to maturity (YTM) . Coupon yield is the annual interest rate established when the bond is issued, and this figure remains the same for the lifetime of the bond. Current yield depends on the bonds price and its coupon (or its interest payment), so if the price of the bond changes, the bonds yield also changes. Yield to maturity (YTM) is the overall interest rate earned by an investor who buys a bond at the market price and holds it until maturity. It is often quoted in terms of an annual rate and may differ from the bonds coupon rate. The relationship between bond prices and yields is inverse, meaning that as the price of a bond goes up, its yield goes down, and vice versa.