What is bond yield?


In simple terms, bond yield is the return an investor gets for a bond over a specific period of time. For example, when you buy a 10-year bond worth ₹10,000 with a coupon rate of 7% you will get an annual return of ₹700. However, when the price of the bond in the secondary market falls to ₹8,000, the yield will fall to ₹569. Bond yields are inversely correlated to bond prices. When prices rise, yields fall, and vice versa. A rise in bond yields is bad news for the stock markets. This is because when the yields rise, debt instruments become relatively more attractive than equities. Bonds provide fixed income to investors and are relatively less risky and volatile.

Post a Comment