Bond yield definition

Bond yield is the return you get from holding a bond, usually shown as a percentage.

What is bond yield?

Bond yield is the return you get from holding a bond, usually shown as a percentage. It tells you how much income you’re earning from the bond compared to what you paid for it.

There are a couple of ways to look at it:

  • Coupon yield: based on the bond’s original price. For example, if a £1,000 bond pays £50 a year, the yield is 5%.
  • Current yield: based on the bond’s current market price. If that same bond is now selling for £900, your £50 return gives you a higher yield (around 5.6%).

Bond yields can move up or down depending on interest rates and demand. When yields go up, prices usually go down, and vice versa. Investors often watch bond yields to get a sense of where the economy – and interest rates – might be heading.

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Investing glossary

It's important you know

Capital at risk. All investing should be for the longer term. The value of your investments can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in the future.

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Payments you make into your pension won’t be accessible until the minimum pension age (currently 55, increasing to age 57 from 2028). Tax treatment depends on individual circumstances and may be subject to change in the future.

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