Bond yield
The annual return a bond pays relative to its price. When bond prices fall, yields rise, and the other way round.
In plain English
A bond is a loan to a government or company. In return, the borrower pays regular interest (the “coupon”) and gives the money back at the end.
The yield is the return you get based on the price you pay. Because the coupon is fixed, a cheaper bond price means a higher yield, and a more expensive price means a lower yield.
An everyday example
A £100 bond paying £5 a year yields 5%. If its price drops to £90, that same £5 is now a yield of about 5.6%. UK government bonds are called “gilts”.
Why it matters for investors
Government bond yields are a benchmark for the whole financial system. Mortgage rates, company borrowing costs and how much investors are willing to pay for shares are all influenced by them.
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Related terms
Education only, not financial advice. Examples are simplified and use illustrative numbers.