Current Yield

Current yield means a bond’s annual coupon payment divided by its current market price. In simple terms, current yield shows the income return from a bond based on today’s price. Current yield is important because it helps investors understand how much interest income they receive relative to the price they pay. It is simpler than yield to maturity but less complete. For example, if a bond pays $50 per year and trades at $1,000, its current yield is 5%. Current yield is not the same as yield to maturity. Current yield focuses on coupon income, while yield to maturity also includes price gains or losses by maturity.