Bond Yield

Bond yield represents the return an investor receives from a bond investment, expressed as an annualized percentage. There are several ways to measure yield, each providing different insights. Current yield is the simplest: annual coupon payment divided by the bond's current market price. Yield-to-maturity (YTM) is the most comprehensive measure, calculating the total return if held to maturity including coupon payments, reinvestment income, and any gain or loss from the difference between purchase price and par value. Yield-to-call (YTC) calculates return assuming the bond is called at the earliest call date. Yield-to-worst (YTW) is the lowest of YTM and all possible YTC values, representing the worst-case scenario. Bond yields move inversely to bond prices — when prices rise, yields fall, and vice versa. This inverse relationship is one of the most fundamental concepts in fixed income investing and is driven by the fixed nature of coupon payments.