Bond Yield
A family of return measures with different assumptions—not a guaranteed realized return.
Bond yield is a family of measures relating bond cash flows to price. Current yield, yield to maturity, yield to call, spot rates, and yield spread answer different questions. Quoted yield is not necessarily the return an investor will realize.
Frequently Asked Questions
Does yield to maturity equal the return an investor will earn?
Not necessarily. YTM assumes contractual payments occur, the bond is held to maturity, and coupons are reinvested at the calculated yield. Default, calls, sales before maturity, taxes, fees, and changing reinvestment rates alter realized return.
What is the difference between coupon rate and current yield?
The coupon rate is based on face value, while current yield divides annual coupon payments by current price. Current yield ignores principal gain or loss, time to maturity, and reinvestment.
Do bond prices and yields always move inversely?
For a fixed set of promised cash flows and yield convention, price and yield move inversely. In practice, embedded options, credit expectations, liquidity, inflation, and changing cash-flow assumptions can complicate the relationship.
Is a higher bond yield always better?
No. Higher yield may compensate for credit, duration, call, liquidity, currency, inflation, or structural risk. Compare expected cash flows, recovery, seniority, maturity, and scenario outcomes.