Current Yield
Current yield is the annual income from a bond (coupon payment) divided by its current market price, ignoring capital gains/losses at maturity.
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Definition
Current yield is the annual income from a bond (coupon payment) divided by its current market price, ignoring capital gains/losses at maturity.
Use case
Used in fixed income workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Current Yield
Current yield provides a snapshot of income return but is incomplete. It ignores the time value of money, reinvestment assumptions, and whether the bond trades at discount or premium. For zero-coupon bonds, current yield is zero despite positive YTM. It's most useful for comparing income from bonds with similar prices.
Example: A bond with $1,000 face value, 6% coupon ($60 annually), trading at $900. Current yield = $60 / $900 = 6.67%. YTM is higher still (~7.5%) because the investor receives $1,000 at maturity despite paying $900 — the $100 gain adds to total return.