Bond yield is the effective rate of return that a bond earns. A bond is an instrument for borrowing money. Bonds are issued by companies and governments to raise funds. The bond’s rate of return changes with the price of the bond i.e. is not fixed. Eg: if the face value of a 10 year bond is 100 INR and it’s coupon payment is 5 INR, then the bonds are brought by the investor at a face value of 100 INR. The issuer will pay the investor 5 INR every year (coupon payment). At the end of 10 years, the issuer will pay 100 INR to the investor. In this case, the bond yield is 5%. Recently, bond yields have been rising in both domestic and global markets.
Topics: Bond yield
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