Summary
Current Yield measures the annual interest income generated by a bond as a percentage of its current market price. It focuses on income from the coupon relative to the price paid.
Unlike Yield to Maturity, Current Yield does not fully account for gains or losses that may occur if the bond is held until maturity.
Why it matters
Current Yield helps investors estimate the income return from a bond at its current price. It is useful for income-focused investors who want to compare the cash income generated by different bonds.
It can also help show how price changes affect income yield.
How it is calculated
Current Yield = Annual Coupon Payment ÷ Current Bond Price × 100
How to read it
A higher Current Yield means the bond is generating more annual income relative to its current price. However, it does not show the full expected return because it does not include the effect of maturity value.
Investors should compare Current Yield with Yield to Maturity for a more complete view.