What it is
Yield represents the return an investor receives from an investment over a period, usually a year, relative to its cost or current price. For bonds, it's often the interest rate paid by the issuer. For stocks, it might refer to a dividend yield, which is the annual dividend per share divided by the share price. Different types of yield calculations exist, such as current yield or yield to maturity, each providing a specific perspective on the investment's income generation.
In markets, rising yields typically indicate a higher cost of borrowing and can make bonds more attractive relative to stocks, potentially leading to a sell-off in equities. Falling yields suggest the opposite. Investors follow yield curves, which plot yields of bonds with different maturities, to gauge economic expectations and interest rate policy. Changes in bond yields, particularly government bonds, influence mortgage rates and corporate borrowing costs.
Why it matters
Understanding yield helps you assess an investment's income potential and compare it against alternatives. It's a key factor in fixed-income decisions and can signal broader market trends.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice