{"id":20443,"date":"2024-02-13T01:05:29","date_gmt":"2024-02-12T19:35:29","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=20443"},"modified":"2025-04-06T01:21:56","modified_gmt":"2025-04-05T19:51:56","slug":"bond-yield","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/bond-yield\/","title":{"rendered":"What is Bond Yield?"},"content":{"rendered":"<h2>What is a Bond?<\/h2>\n<ul>\n<li>A bond is a\u00a0fixed-income instrument that represents a\u00a0loan made by an investor to a borrower (typically corporate or governmental)\u00a0for a set period of time in\u00a0return for regular interest payments.<\/li>\n<li>The\u00a0time from when the\u00a0bond is issued\u00a0to\u00a0when\u00a0the borrower has agreed to pay the\u00a0loan back\u00a0is\u00a0called its \u2018term to maturity\u2019.\u00a0<\/li>\n<li>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<\/li>\n<\/ul>\n<h2>What is Bond Yield?<\/h2>\n<ul>\n<li>It is the\u00a0return an investor expects to receive each year over its term to maturity.<\/li>\n<li>It partially\u00a0depends on coupon payments, which\u00a0refer to the periodic interest income obtained as a reward for holding bonds.<\/li>\n<li>The\u00a0bondholders receive the bond\u2019s face value at the end of the bond\u2019s life. However,\u00a0one may buy bonds at par value, discount (at a price lower than par value),\u00a0or premium (at a price higher than par value)\u00a0as they trade in the secondary market.\u00a0<\/li>\n<li>Therefore, the\u00a0prevailing market price of\u00a0bonds also affects the bond yield.<\/li>\n<li>It is calculated by using the following\u00a0formula:\n<ul>\n<li>Bond Yield= Coupon Amount\/ Price<\/li>\n<\/ul>\n<\/li>\n<li>Bond Yield vs. Price:\n<ul>\n<li>Price and yield are\u00a0inversely related.<\/li>\n<li>As the price of a bond goes up, its yield goes down, and as yield goes up, the price of the bond goes down.<\/li>\n<li>Example: Suppose interest rates fall.\u00a0New bonds that are issued will\u00a0now offer lower interest payments.\u00a0This\u00a0makes existing bonds\u00a0that were issued before the fall in interest rates\u00a0more valuable to investors, because they offer higher interest payments compared to new bonds. As a result,\u00a0the price of existing bonds will increase.<\/li>\n<li>However, if a bond&#8217;s price increases, it is now more expensive for a potential new investor to buy. The bond&#8217;s yield will then fall because the return an investor expects from purchasing this bond is now lower.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1) What are Debt Securities?<\/h3>\n<p>A debt security is any debt that can be bought or sold between parties in the market prior to maturity. Its structure represents a debt owed by an issuer (the government, an organization, or a company) to an investor who acts as a lender.Examples of debt securities include a government bond, corporate bond, certificate of deposit (CD), municipal bond, etc.<\/p>\n<p><strong>Source:<\/strong> <a href=\"https:\/\/www.investopedia.com\/terms\/b\/bond-yield.asp\" target=\"_blank\" rel=\"nofollow noopener\"><u>Bond Yields To Soften With Moderating Inflation, Says RBI Governor<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bond Yield is the return an investor expects to receive each year over its term to maturity.<\/p>\n","protected":false},"author":5,"featured_media":20444,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-20443","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/20443","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=20443"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/20443\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/20444"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=20443"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=20443"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=20443"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}