A news headline says the 10-year Treasury yields 5.2%. The bond you're looking at has a 4.5% coupon. Neither number is wrong, and they aren't supposed to match. This is Part 3 of our Bonds, Explained series, on the difference between the rate printed on a bond and the return you actually earn.
Three numbers, three meanings
FINRA's explainer on bond yield and return separates them cleanly.
- Coupon rate is the annual interest rate set when the bond was issued. It does not change during the bond's life.
- Current yield is the coupon divided by the bond's current market price.
- Yield to maturity (YTM) is the overall rate earned by an investor who buys a bond at the market price and holds it until maturity. It counts the coupons and any gain or loss between the price you paid and the face value you receive.
FINRA's key point: price and yield are inversely related. As the price of a bond goes up, its yield goes down, and vice versa.
The same bond at four prices
Take our hypothetical $1,000 bond with a 4.5% coupon ($45 a year) and 10 years left. Its coupon never changes. What changes is what you pay for it.
| Price you pay | Coupon rate | Current yield | Yield to maturity* |
|---|---|---|---|
| $970 (discount) | 4.50% | 4.64% | 4.89% |
| $1,000 (par) | 4.50% | 4.50% | 4.50% |
| $1,030 (premium) | 4.50% | 4.37% | 4.13% |
| $1,060 (premium) | 4.50% | 4.25% | 3.77% |
*Our calculation, assuming annual payments. Current yield is simple division: $45 ÷ $970 is 4.64%. FINRA's own example works the same way: a $1,000 bond paying $45 a year that trades at $1,030 has a current yield of 4.37%.
Notice what happens to yield to maturity. Pay $970 for a bond that will repay $1,000, and you earn the coupons plus a $30 gain at maturity, so your yield is higher than the coupon. Pay $1,030 and you accept a $30 loss at maturity that offsets part of the coupons, so your yield is lower. Investor.gov describes yield to maturity as a widely used measure to compare bonds.
What the Treasury yield in the news is
When reports cite the 10-year Treasury yield, they're quoting a market yield read from Treasury's daily par yield curve, which Treasury says is derived from indicative closing bid prices on Treasury securities. It tells you what the market currently demands to lend to the government for that long. It is not the coupon on any particular bond.
Why this matters
- Compare bonds by yield to maturity, not coupon. A bond with a high coupon may cost far more than face value, which lowers your actual return.
- A falling price is a rising yield. When rates climb and a bond's price slips, a new buyer is locking in a better yield. That is bad news only for people who must sell.
- Yield to maturity assumes you hold to maturity and that every coupon is paid. If you sell early or the issuer defaults, your result will differ.
Common questions
What's the difference between coupon and yield on a bond?
The coupon is the fixed interest rate set when the bond is issued, based on face value. Yield is the return you earn based on the price you actually pay. When a bond trades above or below face value, yield and coupon differ.
What is yield to maturity?
Yield to maturity is the overall annual rate earned by an investor who buys a bond at the market price and holds it until it matures. It includes both the coupon payments and any gain or loss relative to face value.
Why do bond yields rise when prices fall?
Because the coupon payments are fixed. If you pay less for the same payments, the payments represent a larger percentage of what you paid. Price and yield are inversely related.
- FINRA, Bond Yield and Return
- Investor.gov, What Are Corporate Bonds?
- U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates, October 2026
- How Bonds Work: Price, Coupon, Maturity, and Why Interest Rates Move Them
- Treasury Bills, Notes, Bonds, and TIPS: What Each One Is
- Bond Duration Explained: How Much a Rate Move Can Hurt
- I Bonds vs. TIPS: Two Ways Treasury Protects Against Inflation
- Bond Ladders and the Yield Curve: Reading What Treasury Rates Are Saying