Bond Yield
The return an investor earns by holding a bond — driven by its price, coupon, and time to maturity. Moves inversely with price.
Bond yield is the annual return an investor earns from a bond relative to its current market price. Unlike the coupon rate (fixed at issuance), yield fluctuates continuously as bond prices move in the secondary market.
The critical relationship: when bond prices rise, yields fall; when prices fall, yields rise. This inverse relationship is fundamental to understanding how monetary policy and market sentiment interact with all asset classes.
Traders monitor Treasury yields as the real-time pricing of Fed policy expectations and inflation outlook. Rising yields tighten financial conditions even before the Fed acts — higher borrowing costs ripple through mortgages, auto loans, and corporate debt immediately.