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Dictionary / The economy

What Is a Bond Yield?

A bond yield is the yearly return you get from a bond, shown as a percentage of its price. When people say "yields are rising", they mean bonds are paying more.

A simple example

A bond pays $50 a year. If you buy it for $1,000, your yield is 5%. If its price falls to $900, the same $50 is a yield of about 5.6% for a new buyer.

Why prices and yields move opposite

The yearly payment is fixed. So when the price falls, the yield rises, and when the price rises, the yield falls. Rising interest rates push old bond prices down, because new bonds pay more.

Why stock investors watch yields

The 10-year US Treasury yield is a key number for the whole market. When it rises, safe bonds become more attractive and future company profits are worth less today. That often weighs on stocks, especially fast-growing ones.

Related terms

BondA loan you give to a company or government. Interest ratesThe price of borrowing money. Yield curveInterest rates for short and long loans, side by side. Treasury billsShort-term loans to the US government. Federal ReserveThe US central bank. InflationWhen prices rise and money buys less.

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