A bond yield is a return on investment, expressed as a percentage, for a bond. It is an approximate, simplified rate reflecting the cost to the debtor and the return to the holder of a debt instrument. Nominal yield refers to the rate at which the amount of money in any investment increases. Conversely, the more you pay for a bond, the smaller your profit will be and the lower your yield will be. The current yield is those same payments divided by the bonds spot market price.
A bond differs from corporate shares of stock since bond payments are predetermined and provide a final payoff date, while stock dividends vary depending on profitability and corporate decisions to distribute. Equities have suffered two big bear markets since 2000 and are wobbling again. Bond yield meaning in the cambridge english dictionary. The schedule for issuing debt is announced quarterly. The yield to maturity, book yield or redemption yield of a bond or other fixedinterest security, such as gilts, is the internal rate of return earned by an investor who buys the bond today at the market price, assuming that the bond will be. Written documents by which a government, corporation, or individualthe obligorpromises to perform a certain act, usually the payment of a definite sum of money, to anotherthe obligeeon a certain date. Dictionary term of the day articles subjects businessdictionary business dictionary dictionary toggle navigation. A bonds duration changes with time and as its price and yield change, however. Bond yield is the return an investor realizes on a bond. Where a bond is sold at a discount on the par value, it equals the difference between the purchase price and amount received on bond s maturity date.
The yield to call is the irr on the bonds cash flows, assuming it is called at the first opportunity, instead of being held till maturity. If youre interested in learning how to calculate bond yields, check it out. A convertible bond gives the holder the option to convert bond. Constant maturity treasury dictionary definition constant. Sep 15, 2019 this alphabetical chemistry dictionary offers definitions and examples of important chemistry and chemical engineering terms. This is the amount of money that bond issuers promise to be repaid bondholders at a future date. The formula dictates that a premium bond will have a current yield more. Yield definition is to bear or bring forth as a natural product especially as a result of cultivation. Highyield bond article about highyield bond by the free. Yield to maturity definition and meaning collins english dictionary. The yield of a bond is inversely related to its price today.
Get the definition of duration in thestreets dictionary of financial terms. Yield, submit, surrender mean to give way or give up to someone or something. The maturity of a bond is the length of time until the bond comes due and the bondholder receives the par value of the bond. High yield bond how is high yield bond abbreviated.
The yield to call is the irr on the bond s cash flows, assuming it is called at the first opportunity, instead of being held till maturity. Bond yield is the amount of return an investor will realize on a bond, calculated by dividing its face value by the amount of interest it pays. Ead is a closedend highyield bond fund, erc is a closedend income fund and erh is a closedend equity and highyield bond fund. Treasury notes dictionary definition treasury notes defined.
Highyield bond article about highyield bond by the. Dictionary of financial terms rss feed for yield curve definition a yield curve is a chart of bond yields from the shortestmaturity issues to the longestmaturity ones. Yield definition, to give forth or produce by a natural process or in return for cultivation. Information and translations of yield to maturity in the most comprehensive dictionary definitions resource on the web.
In trading terms, stocks, too, you often have the bid and the ask. Investors can calculate the book ytm, the book ytc, etc. It bears interest and promises to pay a certain sum of money to the holder after a definite period, usually 10 to 20 years. Yieldtomaturity dictionary definition yieldtomaturity defined. Also known as junk bonds, highyield bonds are bonds issued by companies that are judged likely, relative to stronger companies, to default by failing to make interest and principal payments on.
Ead is a closedend high yield bond fund, erc is a closedend income fund and erh is a closedend equity and high yield bond fund. Definition of bond dissociation energies in the medical dictionary by the free dictionary. Treasury bill, note, or bond would be if it were issued on that day. In finance, the yield on a security is the amount of cash in percentage terms that returns to the. What is the stated interest rate of a bond payable. Bond yield definition in the cambridge english dictionary. A bonds yield to maturity ytm is the internal rate of return required for the present value of all the future cash flows of the bond face value and coupon payments to equal the current bond price. Definition of bond yields in the financial dictionary by free online english dictionary and encyclopedia. For example, mediumterm notes generally mature in one to less than ten years, while longterm bonds mature in ten years or longer. Yield to maturity definition is the total rate of return to an owner holding a bond. To yield is to concede under some degree of pressure, but not necessarily to surrender totally. Understand what kind of yield is being promised on a.
It is defined as the bonds internal rate of return irr of all its cash flows. People including overly eager bond salespeople often misuse the term or use it inappropriately to gain an advantage in the bond market. Also new to this edition is the addition of the full codata recommended values of the fundamental physical constants. Also known as junk bonds, high yield bonds are bonds issued by companies that are judged likely, relative to stronger companies, to default by failing to make interest and principal payments on. A bond is a fixed income investment in which an investor loans money to an entity typically corporate or governmental which borrows the funds for a defined period of time at a variable or. Definition of bond yield from the cambridge business english. Ytm allows investors to compare a bonds expected return with those. Where a bond is sold at a discount on the par value, it equals the difference between the purchase price and amount received on bonds maturity date. Describes a noun or pronounfor example, a tall girl, an interesting book, a big house. Bond equivalent yield means, in respect of any security the rate for which is quoted in the wall street journal on a bank discount basis, the bond equivalent yield expressed as a percentage for such security which appears on telerates united states treasury and money market composite page 0223, rounded up to the nearest one onehundredth of one percent. The par value of a bond also called the face amount or face value is the value written on the front of the bond. Conversely, if interest rates decline the market yield declines, then the price of the bond.
Where the bond pays periodic interest, it equals the interest collected. It is an approximate, simplified rate reflecting the cost to the debtor and the return to the holder of a. Search for a definition or browse our legal glossaries. Cash offers a return of virtually zero in many developed countries. The yield is calculated as the coupons the investor receives in a year expressed as a percentage of the cost of the investment. Bond yield is the amount of return an investor will realize on a bond.
This is why ytm is generally called a longer term bond yield even though it is still. The yield to maturity ytm, book yield or redemption yield of a bond or other fixedinterest security, such as gilts, is the theoretical internal rate of return irr, overall interest rate earned by an investor who buys the bond today at the market price, assuming that the bond is held until maturity, and that all coupon and principal payments are made on schedule. The book yield is a measure of a bonds recurring realized investment income that combines both the bonds coupon return plus its amortization. Bond definition, something that binds, fastens, confines, or holds together. Treasury department that represents a daily determination of what the yield on a u. The treasury department publishes these rates on a. The yield to maturity ytm, book yield or redemption yield of a bond or other fixedinterest security, such as gilts, is the theoretical internal rate of return irr, overall interest rate earned by an investor who buys the bond today at the market price, assuming that the bond is held until maturity, and that all coupon and principal. The income one receives from a bond investment, rather than its capital appreciation. Highyield bond definition of highyield bond by medical. Synonyms for highyield bond at with free online thesaurus, antonyms, and definitions. Yield is the return a company gives back to investors for investing in a stock, bond or other security. This alphabetical chemistry dictionary offers definitions and examples of important chemistry and chemical engineering terms. Other tables have been updated and revised, including the table of interatomic distances and bond angles in gas phase molecules and the table on bond dissociation energies.
In most cases, a bond is issued by a public or private entity to an investor who, by purchasing the bond, lends the issuer money. Proper usage and audio pronunciation plus ipa phonetic transcription of the word highyield bond. The less you pay for a bond, the greater your profit will be and the higher your yield will be. Yield to maturity ytm is explained in detail and with examples in the. Information and translations of highyield bond in the most comprehensive dictionary definitions resource on the web. How do you calculate the actual or real interest rate on a bond investment. Each link leads to a more comprehensive discussion of the word.
In either scenario, the coupon rate no longer has any meaning for a new. Current yield is to bonds what a dividend yield is to a stock. Yield to maturity definition of yield to maturity by merriamwebster. Bond, edward legal definition of bond, edward legal dictionary. Yield finance news newspapers books scholar jstor january 2011 learn how and when to remove this template. This farm yields enough fruit to meet all our needs. Measuring the direction of bond yields over time is one way to try to predict future economic movements. Setting the bond yield equal to its coupon rate is the simplest definition. Ytm assumes that all coupon payments are reinvested at a yield equal to the ytm and that the bond is held to maturity. Dictionary term of the day articles subjects businessdictionary. Bond definition is something that binds or restrains.
The yield to maturity of a bond is the rate of return on the bond if it is held to its. Proper usage and audio pronunciation plus ipa phonetic transcription of the word high yield bond. In finance, an exchangeable bond or xb is a straight bond with an embedded option to exchange the bond for the stock of a company other than the issuer usually a subsidiary or company in which the issuer owns a stake at some future date and under prescribed conditions. Highyield bond definition of highyield bond by the free. An exchangeable bond is different from a convertible bond. Highyield bond definition of highyield bond by the.
Current yield dictionary definition current yield defined. To calculate current yield, divide the annual coupon payment of the bond by the bonds current market. Plenty of research carried out on sovereign credit rating and bond yield concerned with developed economies of european union over the period of post financial crisis and debt crisis. Gold and bond yields link explained sunshine profits.
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