Bond Yields
Fixed-income yield concepts for separating contractual coupon, current income, price-implied redemption yield, and quotation conventions.
Bond yield conventions for separating coupon income, annualized quotation, maturity, calls, principal timing, and realized return.
Bond yield measures translate price and cash flows into percentages, but each measure answers a different question. A yield label is meaningful only when its price basis, settlement date, payment schedule, annualization, and redemption scenario are known.
Core Bond Yield Measures separates coupon, current-income, and quotation conventions. Redemption, Call, and Worst Yields covers final maturity, issuer calls, average-life assumptions, and other principal-return paths.
| Measure | Question answered | Important boundary |
|---|---|---|
| Coupon rate | What coupon is paid relative to face value? | Ignores current price |
| Current yield | What annual coupon does today’s price buy? | Ignores redemption gain or loss |
| Bond-equivalent yield | How is a short or periodic rate quoted on a bond-style annual basis? | Not necessarily an effective annual rate |
| Yield to maturity | What yield is implied through final maturity? | Assumes scheduled payment and maturity |
| Yield to call | What yield is implied through one stated call date? | Tests only that call scenario |
| Yield to worst | Which applicable non-default redemption yield is lowest? | Not a default-loss or probability model |
| Redemption yield | What yield applies to a specified redemption date and value? | Ambiguous unless the endpoint is named |
| Yield to average life | How does earlier principal-return timing affect the yield analysis? | Depends on schedule and methodology |
| Holding-period return | What was earned over the investor’s actual horizon? | Requires actual ending value and cash flows |
Use the same full price, accrued interest, settlement date, day count, payment frequency, and annualization across alternatives. Then verify maturity, calls, puts, sinking funds, amortization, prepayment, conversion, default assumptions, and who controls each option.
No quoted yield guarantees realized return. Credit events, sale before redemption, changing market value, reinvestment rates, liquidity, transaction costs, taxes, inflation, and currency can all change the outcome.
Bond Yield provides the complete interpretation checklist for comparing these measures.
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Fixed-income yield concepts for separating contractual coupon, current income, price-implied redemption yield, and quotation conventions.
Bond yield measures for comparing final maturity, issuer calls, principal repayment timing, and the lowest contractual redemption outcome.