{"id":11146,"date":"2025-07-02T10:20:04","date_gmt":"2025-07-02T04:50:04","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=11146"},"modified":"2025-07-02T14:05:05","modified_gmt":"2025-07-02T08:35:05","slug":"what-is-bond-yield","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/what-is-bond-yield\/","title":{"rendered":"Bond Yield"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><b>Bond Yield Latest News<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Yield on India\u2019s benchmark 10-year bonds will stay soft in July, according to Bank of Baroda (BoB) Research.<\/span><\/p>\n<h2 style=\"text-align: justify;\"><b>What is a Bond?<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A bond is a <\/span><b>loan made by an investor<\/b><span style=\"font-weight: 400;\"> to a borrower for a <\/span><b>set period of time in return for regular interest payments.<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The <\/span><b>time from <\/b><span style=\"font-weight: 400;\">when the<\/span><b> bond is issued to when the borrower has agreed to pay<\/b><span style=\"font-weight: 400;\"> the loan back is called its <\/span><b>\u2018term to maturity\u2019.\u00a0<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The bond issuer uses the money raised from bonds to undertake various activities such as funding expansion projects, refinancing existing debt, undertaking welfare activities, etc.\u00a0<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>What is Bond Yield?\u00a0\u00a0<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It is the <\/span><b>return<\/b><span style=\"font-weight: 400;\"> an investor expects to <\/span><b>receive each year over its term to maturity<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It partially <\/span><b>depends on coupon payments,<\/b><span style=\"font-weight: 400;\"> which refer to the <\/span><b>periodic interest income <\/b><span style=\"font-weight: 400;\">obtained as a reward for holding bonds.<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The bondholders receive the bond\u2019s face value at the end of the bond\u2019s life. However, one may buy bonds at par value, discount (at a price lower than par value), or premium (at a price higher than par value) as they trade in the secondary market.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Therefore, the <\/span><b>prevailing market price of bonds also affects the bond yield.<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It is calculated by using the following <\/span><b>formula<\/b><span style=\"font-weight: 400;\">:<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Bond Yield = Coupon Amount\/Price<\/b><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Bond Yield vs. Bond Price<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The <\/span><b>prices <\/b><span style=\"font-weight: 400;\">at which investors buy and sell <\/span><b>bonds in the secondary market move in the opposite direction to the yields they expect to receive .\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Once a <\/span><b>bond <\/b><span style=\"font-weight: 400;\">is issued, it<\/span><b> offers fixed interest payments <\/b><span style=\"font-weight: 400;\">to its owner over its term to maturity, which does not change.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">However, <\/span><b>interest rates in financial markets change<\/b><span style=\"font-weight: 400;\"> all the time, and, as<\/span><b> a result, new bonds <\/b><span style=\"font-weight: 400;\">that are issued<\/span><b> will offer different interest payments <\/b><span style=\"font-weight: 400;\">to investors <\/span><b>than existing bonds<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>For example, suppose interest rates fall<\/b><span style=\"font-weight: 400;\">. <\/span><b>New bonds<\/b><span style=\"font-weight: 400;\"> that are issued will <\/span><b>now offer lower interest payments.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">This <\/span><b>makes existing bonds <\/b><span style=\"font-weight: 400;\">that were issued before the fall in interest rates <\/span><b>more valuable<\/b><span style=\"font-weight: 400;\"> to investors, because they offer higher interest payments compared to new bonds.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">As a result, the <\/span><b>price of existing bonds will increase<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Bond yield <\/b><span style=\"font-weight: 400;\">is the <\/span><b>earning of an investor from a bond <\/b><span style=\"font-weight: 400;\">over a specific tenure, <\/span><b>expressed in a percentage<\/b><span style=\"font-weight: 400;\">. It is <\/span><b>dependent on the interest rate and bond price.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">As a result, w<\/span><b>hen the interest rate falls<\/b><span style=\"font-weight: 400;\">, and the<\/span><b> bond price is higher than the face value<\/b><span style=\"font-weight: 400;\"> of the bond, your <\/span><b>bond yield will be lower than the coupon rate.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Similarly, <\/span><b>when interest rates rise and bond prices are lower than the face value, <\/b><span style=\"font-weight: 400;\">your <\/span><b>bond yield will be higher than the coupon rate.<\/b><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>Source: <a href=\"https:\/\/www.thehindu.com\/business\/indias-10-year-bond-yield-to-stay-soft-at-625-bob\/article69760158.ece\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bond yield is the annual return an investor earns on a bond, calculated over its term to maturity, reflecting income and price changes over time.<\/p>\n","protected":false},"author":5,"featured_media":53193,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[1280,21,23],"class_list":{"0":"post-11146","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"tag-bond-yield","9":"tag-prelims-pointers","10":"tag-upsc-prelims-current-affairs","11":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/11146","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=11146"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/11146\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/53193"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=11146"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=11146"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=11146"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}