Bond Yield

High bond yields have made bond investments popular, and plenty of potential investors are initiating bond investments. Bond yields are provided to the potential investors and these investors periodically receive coupons, which may be annual or semi-annual.
High yield bonds are rated below the average investment grade, which is determined by credit rating agencies. Financial analysts and fund managers provide comprehensive yield calculations. It is prudent to have a clear understanding of the factors affecting bond yields before choosing to invest in bonds.

As a bond is issued in the trading market, several future payouts are estimated but the asking price varies. Buying such a bond may be highly beneficial.Bond yield can provide a comprehensive idea about risks associated with the investment. High yield bonds have more risks of defaulting. These bonds attract investors, as the bond yield remains high.

Bond yield can be classified into three divisions as follows:

Nominal yield or flat yield:
Nominal yield is measured by dividing yearly income from the bond by its par value.

Running yield or current yield:
Running yield is estimated on the basis of the quotient of annual income divided by present current market price. Whenever the market price goes down, the bond yield goes uphill.

Redemption Yield:
This type of yield provides the total price value of the bond at the time of maturity. It provides a clear overview of the interest value combined with profit and losses that an investor will receive during the bond maturity.

In this era of online communication and electronic commerce, there are numerous online bond yielding calculators, and these calculators aid self-analysis. Professional investment advisory service providers effectively benchmark bond yields.

Expert financial analysts use several bond yield curves. Financial analysts and investors closely study treasury securities at the time of a bond’s maturation. Corporate issuers with low creditworthiness provide high bond yields and for this reason, these bonds are gaining popularity across United States, Europe and different parts of Asia.

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Last Updated on : 10th July 2013

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