Lesson 2 of 6 · All lessons in this module
- Periodicity and converting annual yieldsVideo lesson
- Current yield and other yield conventions
- Callable bonds: yield-to-call, yield-to-worst and option-adjusted yieldVideo lesson
- Benchmark rates, yield spreads and the G-spread
- I-spread, Z-spread and option-adjusted spreadVideo lesson
- Integrated cases: G-spreads from prices, Z-spreads from curves
Lesson 2 of 6 · 13 min
Current yield and other yield conventions
Beyond the YTM, the market quotes several simpler or convention-adjusted yields, and you must know what each one ignores before comparing bonds.
In short
- Current yield = annual coupon ÷ flat price. It ignores coupon timing, reinvestment, accrued interest and any gain or loss to par.
- Street convention yields assume cash flows arrive on scheduled dates, even weekends and holidays. A true yield uses actual payment dates and is never higher.
- Corporate yields typically use 30/360; government yields use actual/actual. A government equivalent yield restates a 30/360 yield on an actual/actual basis (≈ × 365/360).
- Simple yield = (annual coupon + straight-line share of the gain or loss to par) ÷ flat price. Used mostly for Japanese government bonds (JGBs).
- To compare two bonds' yields, put both on the same periodicity (and day count) first.
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