What are Bond Yields?
Bond yields are income stream that is paid out from the bond usually semi-annually or twice a year.
Bond yields are a complex approach for newer investors to realize initially because they are calculated based on a several parts and one critical part, the bond prices is moving.
Also review the following.
Bond Yields Explained
Bond Yield and Interest Rates
To Understanding Bond Yields
The first, and most important, concept you need to understand when discussing bond yields is that bond prices and bond yields have an inverse correlation.
Simply think of a teeter totter, when prices go down yields go up.
When bond prices are down, bond yields are going up. While it may seem counter-intuitive, understanding this relationship will help you avoid a lot of confusion when dealing with bonds.
So How Does It Work?
If you assume you have a 10% coupon bond that matures in one year and will pay you $1,000. If you buy this bond for only $ 900 dollars the price is down $ 100 from the maturity or par value. So in a year you receive both the 10% coupon and the $100 increase in value or principle, so the total bond yield will be roughly 20%.
If you buy the same bond for $1100 you will loses $100 in principle when it matures, then by adding in the 10% coupon you bond yield would be roughly zero. Thus the loss of principal in this simple example is equal to the bond income.
We hope this helps, we welcome you to review are many bonds, where we pride globally high institution yields to our retail investors. Please look to your right of this page as we have categorized the many types of bonds and countries that we service.