What Is Current Yield?
Current yield is a simple measure of the income a bond produces relative to what it costs to buy today. It compares the bond's annual coupon payments with its current market price rather than with its face value. Because it uses the price an investor would actually pay, it reflects the income return at that moment.
How It Is Calculated
Current yield = Annual coupon payment / Current market price
The annual coupon payment is the total interest the bond pays over a year. A bond with a $1,000 face value and a 5% coupon pays $50 per year. If that bond trades at $950, its current yield is $50 divided by $950, or about 5.26%. If it trades at $1,050, the current yield falls to about 4.76%. The relationship is inverse: when the price rises, the current yield falls, and when the price falls, the current yield rises, as long as the coupon stays the same.
Why It Matters to Investors
Current yield gives a quick view of the cash income a bond generates, which can matter to investors who depend on regular payments. It is easy to compute from information shown on most bond quotes. However, it has clear limits. It ignores any gain or loss that would occur if the bond is held to maturity, when the issuer repays the face value. It also does not account for how coupon payments might be reinvested. For a fuller picture, analysts often use yield to maturity, which includes the time remaining until repayment and the difference between the price paid and the face value.
Current Yield and Other Yield Measures
The term is most often used for bonds, but a similar idea applies to stocks, where dividend yield divides annual dividends by the share price. Current yield is a snapshot: it changes whenever the market price changes, so the same bond can show different current yields on different days. Investors usually compare it with other measures rather than relying on it alone.
Updated October 19, 2026. For general education only; not financial, tax or legal advice.