Current yield is a bond's annual coupon divided by the price you pay. A $1,000 bond paying $50 a year, bought for $950, has a current yield of 5.26%.
It measures income, not total return. Yield to maturity and yield to call also count the gain or loss between your price and what you're repaid. They can differ from current yield by a point or more.
Current yield: a year's coupons over today's price
In FINRA's definition, current yield is the bond's coupon divided by its current market price. The coupon yield, or coupon rate, is set at issue and never changes. The price does, so the current yield moves the opposite way. Here's FINRA's example, a $1,000 bond paying $45 a year, with two more prices added:
| Quoted at | Price | Annual coupon | Current yield |
|---|---|---|---|
| 95 | $950 | $45 | 4.74% |
| 100 (par) | $1,000 | $45 | 4.50% |
| 103 (FINRA's example) | $1,030 | $45 | 4.37% |
| 110 | $1,100 | $45 | 4.09% |
The calculator matches FINRA's 4.37% at 103. A quote of 103 means 103% of face value, so $1,030. Between 95 and 110, the yield slides from 4.74% to 4.09%, though the bond pays the same $45 throughout.
Same yield to maturity, three different current yields
Current yield ignores what happens at maturity, when you get face value back rather than what you paid. Take three 10-year bonds, priced with the bond price calculator to yield 6% to maturity. Only their coupons differ:
| Bond | Coupon rate | Price | Current yield | Yield to maturity |
|---|---|---|---|---|
| Discount bond | 4% | $851.23 | 4.70% | 6.00% |
| Par bond | 6% | $1,000.00 | 6.00% | 6.00% |
| Premium bond | 8% | $1,148.77 | 6.96% | 6.00% |
By current yield, the premium bond looks best at 6.96%, a full 2.26 points ahead of the discount bond. Yet all three have the same 6% yield to maturity. FINRA describes that as the overall rate earned by buying at the market price and holding to maturity.
The premium bond's extra income offsets a $148.77 loss, since it repays only $1,000. The discount bond's thinner income comes with a $148.77 gain. To compare bonds as investments, look at yield to maturity. The bond YTM calculator finds it from price, coupon and term.
When current yield is the number to use
Current yield is the right figure when you care about cash coming in. Say you want $6,000 a year in coupons from bonds like these. At the premium bond's 6.96%, that takes about $86,200. At the discount bond's 4.70%, it takes about $127,700.
The catch: at maturity, the premium bonds repay only face value, about 13% less than you paid. That suits a plan to spend the income now and take less back later. It doesn't suit a plan that counts on getting the full $86,200 back.
Callable bonds: yield to call and yield to worst
Some bonds let the issuer buy them back early at a set price. FINRA notes an issuer can save money doing so when rates drop below the bond's coupon. For those bonds, look at yield to call: the return if the bond is redeemed at the earliest possible date. Here's a 10-year bond with a 7% coupon, bought at $1,075 and callable at $1,000 in three years:
| If the bond | Years held | Current yield | Yield to that date |
|---|---|---|---|
| Runs to maturity | 10 yr | 6.51% | 5.99% |
| Is called at $1,000 | 3 yr | 6.51% | 4.31% |
The current yield is 6.51% either way, because it never looks past this year's coupons. Held to maturity, the bond yields 5.99%. Called after three years, it yields just 4.31%, since the $75 premium is lost over three years instead of ten. FINRA's yield to worst is whichever of the two is lower, here 4.31%.
FINRA says yield to call is worked out like YTM, using the call date and call price instead. So when the call price equals face value, the YTM calculator gives it too. Enter the years to the call date. The call date and call price are in the bond's terms, which FINRA urges you to understand before buying.
Holding a yield up against Treasuries
To judge a bond's yield, compare it with a Treasury of the same maturity. The Federal Reserve publishes Treasury yields for each business day in its H.15 release, at fixed maturities. For September 24, 2026, it gave 4.99% for 3 years and 5.18% for 10.
H.15 reads those yields off Treasury's daily yield curve. Treasury describes it as a par yield curve, built from closing bid prices on its most recently auctioned securities. Par means a price of 100% of face value. At par, the coupon rate, current yield and yield to maturity match, as the par bond above shows. So hold your bond's yield to maturity, or its yield to worst, against the Treasury figure.
FINRA calls the difference between a bond's yield and a same-maturity Treasury's the credit spread, measured in basis points. One basis point is 0.01%. The three bonds above, all yielding 6% to maturity, sit 82 basis points over the 10-year Treasury's 5.18%. Judged by current yield instead, the premium bond would seem 178 over and the discount bond 48 under. Wider spreads typically indicate higher perceived risk, FINRA adds.
For the callable bond, the fair benchmark is the 3-year Treasury at 4.99%, since a call returns your money then. Its 4.31% yield to worst is 68 basis points below that. In that case you'd earn less than on a relatively risk-free Treasury. The basis point calculator turns any spread into dollars a year.
What a yield figure can't promise
FINRA cautions that yield to maturity and yield to call may not match a bond's total return. Selling before maturity, or reinvesting coupons at other rates, changes the outcome. And every figure here assumes the issuer pays in full and on time.
Sources
- FINRA, Understanding Bond Yield and Return (August 11, 2022)
- FINRA, Callable Bonds: Be Aware That Your Issuer May Come Calling (April 19, 2024)
- FINRA, Spread the Word: What You Need to Know About Bond Spreads (May 8, 2024)
- Federal Reserve Board, H.15 Selected Interest Rates (September 25, 2026)
- U.S. Department of the Treasury, Interest Rate Statistics: Daily Treasury Par Yield Curve Rates (accessed September 26, 2026)