Current Yield is the annual coupon payment as a percentage of the bond's current market price — it reflects the income return at today's price, not face value.
Current Yield = Annual Coupon Payment ÷ Current Market Price × 100. Unlike Coupon Yield (based on face value), Current Yield changes daily as the bond's market price changes. When interest rates rise, bond prices fall → Current Yield rises. When rates fall, prices rise → Current Yield falls. Current Yield only captures the coupon income return, not the capital gain or loss from holding the bond to maturity. YTM incorporates both current yield and the pull-to-par effect (the bond returning to face value at maturity).
If you buy a ₹1,000 face value bond at a market price of ₹920 (discount) with a ₹70 coupon, the Current Yield = ₹70 ÷ ₹920 = 7.6% — more than the face-value Coupon Yield of 7%. If you buy at ₹1,080 (premium), Current Yield = ₹70 ÷ ₹1,080 = 6.5% — less than 7%. Current Yield is what income investors focus on: how much cash income does this bond generate relative to what I paid for it today?
Current Yield = Annual Coupon ÷ Current Market Price × 100.
Changes daily as market price fluctuates.
Bond at discount (price < face value): Current Yield > Coupon Yield.
Bond at premium (price > face value): Current Yield < Coupon Yield.
Current Yield < YTM (for discount bonds) because YTM includes capital gain at maturity.