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.
Why this calculator is useful
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 page is designed to help readers understand the financial scenario clearly, compare the numbers, and make better decisions with practical context.
Why this matters
Bond Yield Calculator turns a common financial or planning question into a clear number you can compare, discuss, and act on.
What to review
Use realistic inputs and update assumptions if your situation changes, because even small changes can shift the outcome noticeably.
How to use the result
Treat the calculation as a practical planning guide and verify it with your records or a professional for important decisions.
Quick examples and best practices
- Use realistic inputs: Enter values that match your real income, loan terms, or investment profile so the result feels practical.
- Compare scenarios: Change one variable at a time to see how the result shifts before making a decision.
- Verify major choices: For high-stakes decisions, cross-check the output with documents, spreadsheets, or a qualified professional.
Common 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.