Bond Yield
A bond's yield is the return an investor earns from it, expressed as an annual percentage, and it moves in the opposite direction of the bond's price.
The simplest measure is current yield: the annual coupon divided by the bond's current market price. A more complete measure is yield to maturity, which also accounts for any gain or loss between the purchase price and the face value repaid at maturity.
Yield and price have an inverse relationship. If a bond with a $1,000 face value and a $50 annual coupon trades at $1,000, its current yield is 5%. If its price falls to $900, the same $50 payment equals a current yield of about 5.6%.
Yields across the market reflect expectations for interest rates, inflation and credit risk. Treasury yields serve as a benchmark for mortgage rates, corporate borrowing costs and stock valuations, which is why financial news follows the 10-year Treasury yield closely.
Rising yields mean falling prices for existing bonds and higher income for new buyers; falling yields mean the opposite.