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YieldRatio of income from an investment to the total cost of the investment over a given period of time.YieldSee: 'dividend yield' and 'bond yield'.Similar MatchesNegative yield curveNegative yield curveWhen the yield on a short-term security is higher than the yield on a long-term security, partially because high interest rates are creating a greater demand for short-term borrowing. Reoffering yieldReoffering yieldIn a purchase and sale, the yield to maturity at which an underwriter offers to sell bonds to investors. Yield gapYield gapA comparison between the average yield from shares (dividend yield) and the average current yield from long dated gilts (15 years or more to redemption). Corporate equivalent yieldCorporate equivalent yieldA comparison of the after-tax yield of government bonds selling at a discount and corporate bonds selling at par. Redemption yieldRedemption yieldYield calculations on bonds aim to show the return on a gilt or bond as a percentage of either its nominal value or its current price. There are three types of yield calculation that are commonly used:Nominal YieldThis is calculated by dividing the annual income on the bond by its nominal or 'par' value. So the nominal yield on a £100 bond which pays 5% interest per year is 5/100 x 100 = 5%.Current or 'Running Yield'This is calculated by dividing the annual income on the bond by its current market price. So if the market price of the £100 bond dropped to £95, the current yield on the bond at that time would be 5/95 x 100 = 5.36%. Note that as the market price of a bond drops, its yield goes up.Redemption Yield'The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures. The income element is the same 'current yield' calculation performed above. The gain/loss element is calculated by taking the difference between the current market price and the nominal value of the bond (e.g. in our example 100 - 95 = 5), dividing it by the number of years til maturity (assume 5 years for simplicity, so 5/5 = 1) and then dividing that figure by the current price of the bond (1/95 x 100 = 1.05%) The yield to redemption is the sum of the current yield (5.36%) and the capital yield (1.05%) = 6.41%. Further SuggestionsFlattening of the yield curvedividend yield Yield spread strategies discount yield Stripped yield Convenience yield nominal yield Realized compound yield gross redemption yield Pure yield pickup swap Yield advantage Relative yield spread Nominal yield Yield equivalence Positive yield curve Annual effective yield Yield differential or pickup Realized yield yield curve Yield spread bond yield flat yield Parallel shift in the yield curve Effective yield Yield to warrant expiration |
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