y

yield

Yield is the expected annual rate of return an investor expects to make from an investment. The rate is normally expressed as a percentage and is normally used to compare financial instruments with different characteristics. The yield curve expresses the relationship between yields and the maturity of instruments with similar credit worthiness. Generally, assets with higher yields have bigger default risks because bond issuers need to offer investors some compensation for the default risk. US Treasury bond yields are backed by the US Government and are considered riskless.


In bonds, yield is the real interest rate paid on a bond. This is calculated by the taking the bond's face value divided by the bond's market price.

In bond markets the yield is usually linked to the how likely the bond issuer is to declare default. The more likely an issuer of debt is to default on their obligations, the higher risk premium, and therefore yield, a lender will require.

3 In equities, yield may refer to the return dividends earn on a share, calculated by taking the annual dividend payments divided by the share's current price.