Educational Purpose Only: YTM shown is an approximation. Actual YTM requires iterative calculation and may differ slightly.
How it works
A bond pays regular interest (the coupon) based on its face value and coupon rate. However, bonds trade in the secondary market at prices that may differ from their face value. The current yield simply divides the annual coupon by the market price to show your income return. The yield to maturity (YTM) goes further — it also accounts for any capital gain or loss you will receive if you hold the bond until it matures and gets redeemed at face value.
When a bond trades below its face value (at a discount), the YTM is higher than the current yield because you gain the difference between the purchase price and the face value at maturity. When it trades at a premium, the YTM is lower.
Bond types in India
Government Securities (G-Secs)
Bonds issued by the Government of India. Carry sovereign guarantee — zero credit risk. Traded on RBI's NDS-OM platform and available to retail investors via RBI Retail Direct.
Corporate Bonds
Bonds issued by companies to raise capital. Higher yield than G-secs but carry credit risk based on the issuer's financial health and credit rating (AAA to D).
Tax-Free Bonds
Issued by PSUs like NHAI, IRFC, and REC. Interest income is tax-exempt, making them attractive for high-income investors in the 30% tax bracket.
Treasury Bills (T-Bills)
Short-term government securities with tenures of 91, 182, or 364 days. Issued at a discount and redeemed at face value — the yield comes from this price difference rather than periodic coupon payments.
Frequently Asked Questions
What is the difference between current yield and YTM?
Current yield = Annual Coupon / Current Market Price. It shows your income return based on what you paid. YTM (Yield to Maturity) is a more complete measure — it accounts for both the coupon income and any capital gain or loss you will receive if you hold the bond until it matures at face value. YTM is the standard benchmark for comparing bonds.
What does it mean when a bond trades at premium, par, or discount?
A bond trades at par when its market price equals its face value. It trades at a premium when market price > face value (typically when its coupon rate is above current market rates). It trades at a discount when market price < face value (when its coupon rate is below current market rates). Premium bonds have YTM < coupon rate; discount bonds have YTM > coupon rate.
Why does bond price fall when interest rates rise?
When market interest rates rise, newly issued bonds offer higher coupons, making existing bonds with lower coupons less attractive. To compete, existing bond prices fall until their YTM matches current market rates. This inverse relationship between interest rates and bond prices is a fundamental principle of fixed income investing.
What is the difference between government bonds and corporate bonds?
Government bonds (G-secs, T-bills) are issued by the central or state government — they carry near-zero default risk but lower yields. Corporate bonds are issued by companies — they carry higher credit risk (hence higher yields) that varies with the company's credit rating. AAA-rated corporate bonds typically yield 0.5–1% above G-secs; lower-rated bonds yield significantly more.
Related Calculators
This calculator uses an approximation formula for YTM. The exact YTM requires iterative calculation and may differ slightly. Results are for educational purposes only and should not be taken as investment advice.
About Bond Yield Calculator
Calculate the current yield and approximate yield to maturity (YTM) of any bond. See annual coupon income and whether the bond trades at premium, par, or discount. This tool is designed to be simple and accessible for users who need quick, reliable results.
When to use this tool
Use the bond yield calculator when you need an accurate, immediate calculation without installing software or registering an account. It is especially useful for everyday decisions, quick comparisons, and planning where you need numbers fast.
How it works
The calculator applies standard, well-known formulas and conventions appropriate to the domain. Results are computed instantly in your browser to preserve privacy and avoid sending personal data to servers.
Limitations and tips
This tool provides informative estimates and is not a substitute for professional advice. For complex or high-stakes decisions, verify results with a qualified professional. Double-check inputs such as units, dates, and currency settings before making decisions.