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Current yield

Annual coupon divided by current market price; a quick income measure that ignores any gain or loss from holding to maturity.

Current yield answers one narrow question: what cash income does this bond throw off per dollar invested right now? It is the bond equivalent of a dividend yield on a stock.

It is useful for income comparisons and misleading for total return, because it completely ignores the pull to par-value. On a premium-bond it overstates your return; on a discount-bond it understates it.

Example: a bond with a 6% coupon trading at 120 has a current yield of $60 / $1,200 = 5.0%. But if it matures in four years you will also lose $200 of price, so the yield-to-maturity is closer to 0.9%.

Related: yield-to-maturity, running-yield, coupon, premium-bond

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