Yield (rentowność) — what is it?
Yield, or bond yield — definition, types and significance. Learn how yield differs from coupon and how to interpret it.
Definition
Yield (rentowność) — percentage return on a bond investment, taking into account coupons (interest) and any difference between purchase price and redemption price. This is a key indicator in the bond market.
Types of yield
Nominal yield (coupon)
The nominal interest rate of the bond. If a bond has a 5% coupon and 1,000 PLN face value — it pays 50 PLN annually.
Current yield
Current yield = Annual coupon / Current market price × 100%
If a bond with 50 PLN coupon costs 950 PLN on the market: current yield = 5.26%.
Yield to Maturity (YTM)
The most comprehensive indicator — includes coupons, purchase price, redemption price and time to maturity. This is the "annualized ROI" of a bond held to maturity.
Why does yield rise when price falls?
Bond price and yield move in opposite directions. If the market demands higher returns (e.g., because interest rates are rising), prices of existing bonds fall so their yield adjusts to the new level.
Yield and rating
The lower the issuer's rating, the higher the yield — investors demand a higher risk premium. "Junk" bonds may offer 8-15% yield, while AAA bonds give 3-4%.
How Freenance can help
Freenance shows the yield of your bonds in your portfolio — both current yield and YTM. You see the real return on each position and can compare it with alternatives.
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