On a bond chart, I always see the terms: Yield & Coupon, which seem to mean the same thing. What is the difference between these two terms?
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Notice that if the Bid is greater than 100, the yield is lower while if the Bid is lower than 100, the yield is higher.– JB KingMar 4, 2014 at 5:29
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1 Answer
Coupon tells us the rate of returns(%) for the bonds when it was first issued based on issue price
Yield tells us the rate of returns(%) for the bond based on current price
Assuming a bond was issued at $1000 , promising to pay $50 yearly , it has a coupon rate of 5% & yield of 5%. However, if due to unforseen circumstances the bond price drops to $500, it still has a coupon rate of 5% but the yield is currently 10%.
Coupon (%) = Returns / Issue Price * 100
Yield (%) = Returns / Current Price * 100
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2Take a look at the YLD in OP's picture. It's not Returns / Current Price * 100. Else how does that zero coupon have any yield? That column is a YTM, Yield to maturity, which is a bit more complex, but takes the difference from today's price to face value into account. Mar 4, 2014 at 18:37