Current Yield
Definition
Current yield is a bond’s annual coupon divided by its clean price. It shows the income return from coupons today, ignoring pull-to-par and reinvestment.
Formula (plain text)
Current Yield = Annual Coupon ÷ Clean Price
Key Takeaways
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Uses the clean price (quotes exclude accrued).
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Ignores capital gain/loss to par and reinvestment of coupons.
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Good for a quick income snapshot, not a total-return measure.
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Compare alongside YTM/YTW for the full picture.
Nigeria Example (illustrative)
Face = ₦1,000,000; coupon = 13% → annual coupon ₦130,000.
Quoted clean price = ₦1,025,000.
Current yield = 130,000 ÷ 1,025,000 ≈ 12.68%.
Common Pitfalls
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Using dirty price in the denominator.
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Treating current yield as total return (it excludes pull-to-par).
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Comparing bonds with very different maturities/call features using current yield alone.
Mini-FAQ
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Why is YTM different from current yield? YTM includes pull-to-par and timing of cash flows; current yield doesn’t.
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Which should I quote? Quote both; use YTM/YTW for total return, current yield for income snapshot.
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Does accrued interest affect it? No — use clean price.
Related Terms
Bond · Coupon · Clean Price · Dirty Price · Yield to Maturity (YTM) · Yield to Worst (YTW)
