Current Yield: Formula, a Real Treasury Example, and Why It Trails Yield to Maturity
Michael Whitman
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Trading since 2017, full-time since 2020
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YouTube creator, 137K subscribers
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Published 2026-09-14
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Updated
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Reviewed
Current yield is a bond's annual coupon divided by its current market price, expressed as a percentage. It is the simplest yield measure and the least complete, because it ignores the maturity date entirely and says nothing about whether you get your capital back.
Current yield is a bond’s yearly coupon payment divided by the price you pay for it today. On 30 Oct 2026 the 1.25% Treasury bond due May 2050 cost $44.9375 per $100, so its current yield was 2.78%, while its yield to maturity, which also counts the climb back to $100, was 5.42%.
That 2.64-point gap is the whole story of this measure. It tells you what the coupon pays relative to the price, and nothing about the price change still to come.
How it works
Current yield = annual coupon in dollars / current price x 100.
- The coupon is fixed on the day the bond is issued. A 1.25% bond pays $1.25 a year on each $100 of face value, in two payments of $0.625.
- The price changes every trading day. Treasury prices are quoted per $100 of face value.
- The maturity date is not in the formula. A bond due next year and one due in 2050 show the same current yield if they pay the same coupon at the same price.
Because the top of the fraction never moves, every change in current yield comes from the bottom. A falling price pushes it up and a rising price pulls it down, with the cash paid to you unchanged.
The stock version is the same division with the dividend on top, which is why the dividend yield page shares the same blind spot.
A worked example
The bond: the Treasury paying 1.25% and maturing 15 May 2050 (CUSIP 912810SN9), priced at $44.9375 per $100 on 30 Oct 2026, the last trading day before this update.
- Annual coupon: 1.25% of $100 = $1.25.
- Current yield: $1.25 / $44.9375 = 2.78%.
- What the formula skipped: at maturity the Treasury repays $100, so the holder also gains $100 - $44.9375 = $55.0625. Spread over the 23.5 years left, that is about $2.34 a year, almost twice the coupon.
- Yield to maturity: solving for the one rate that discounts every remaining $0.625 coupon plus the $100 repayment back to today’s price (plus $0.58 of accrued interest) gives 5.42%.
So the bond pays 2.78% in cash and about 5.42% in total if held to 2050. The current yield is not wrong; it answers a narrower question.
A premium bond runs the other way. The 6.125% Treasury due 15 Nov 2027 cost $101.4375 the same day. Its current yield was $6.125 / $101.4375 = 6.04%, but the $1.4375 above par is lost at repayment a year later, so its yield to maturity was only 4.68%.
Current yield, coupon rate and yield to maturity
| Measure | Divides | 1.25% bond due 2050, 30 Oct 2026 | Answers |
|---|---|---|---|
| Coupon rate | Coupon by $100 face value | 1.25% | What the bond promised at issue |
| Current yield | Coupon by today’s price | 2.78% | Cash income per dollar paid today |
| Yield to maturity | All cash flows, discounted | 5.42% | Total return if held to the end and paid in full |
At a price of exactly $100 the three are equal or close. Below $100 they line up as coupon rate, then current yield, then yield to maturity. Above $100 the order flips. The coupon yield page covers the first column, and the adjusted current yield page shows a middle road that adds a rough share of the gain or loss to par.
The original data
Two questions, both from TreasuryDirect’s FedInvest price files: how far does current yield move when only the price moves, and how far does it sit from yield to maturity across the whole Treasury market?
Method. Price = the FedInvest sell price per $100 for each date, with 30 Oct 2026 the latest file available on 1 Nov 2026 (that file had no end-of-day column yet, so the sell column is used on every date to keep the series consistent). Current yield = coupon / price. Yield to maturity = the standard semiannual formula on price plus accrued interest, settling the next business day. Notes and bonds with a year or less left from that settlement date are left out, because a price quoted in 1/32 steps swings a short bond’s yield too much to compare, and so are inflation-protected (TIPS) and floating-rate notes, whose dollar payments are not fixed.
Test 1: one bond, 13 month-ends (31 Oct 2025 to 30 Oct 2026). The 1.25% bond due 2050 paid the same $1.25 every year of the test. Its price ranged from $42.50 to $50.0625, and its current yield ranged from 2.50% to 2.94%, moving opposite to price every month. Its yield to maturity ranged from 4.73% to 5.72%, always 2.22 to 2.78 points above the current yield.
The highest reading of both came on 30 Sep 2026, when the price touched $42.50: current yield 2.94%, yield to maturity 5.72%. A reader who saw only the 2.94% might think the bond had started paying more. It had not; the price had fallen. The Treasury’s own 20-year par yield rose from 4.65% to 5.68% over the same eleven months, which is the rate move behind the falling price. Current yield picked up a fraction of that move, while yield to maturity tracked it closely.
Test 2: every fixed-rate Treasury note and bond on 30 Oct 2026. 296 securities (187 notes, 109 bonds) had more than a year left. 281 traded below $100, and current yield was lower than yield to maturity on all 281; 14 traded above $100, and current yield was higher on all 14; one sat exactly at $100. The direction is arithmetic. The size of the gap is what the data adds:
| Price per $100, 30 Oct 2026 | Securities | Median current yield | Median yield to maturity | Median gap, points |
|---|---|---|---|---|
| Under $70 | 31 | 3.75% | 5.41% | -1.64 |
| $70 to $85 | 32 | 4.24% | 5.34% | -1.14 |
| $85 to $95 | 63 | 4.10% | 4.86% | -0.80 |
| $95 to $100 | 155 | 4.08% | 4.71% | -0.62 |
| $100 and up | 15 | 4.95% | 4.70% | +0.23 |
Across the 296, the median gap was 0.74 point. 111 were more than a full point apart and only 38 sat within a quarter point. The widest miss was the 0.625% note due 15 May 2030 at $86.8125: current yield 0.72%, yield to maturity 4.72%, a gap of 4.00 points. The 50 securities with coupons under 2.5%, issued when rates were low, all traded below $100.
The check. The Treasury’s par yield curve for 30 Oct 2026 read 4.56% at 2 years, 4.71% at 5, 4.80% at 7, 4.94% at 10 and 5.31% at 30. The yields to maturity computed here for the near-par security closest to each tenor came out at 4.63%, 4.76%, 4.84%, 4.95% and 5.32%, within 0.07 point. Both files are linked: the 296 securities and the 13 month-ends.
The limits. Treasuries only, so no credit risk is in these gaps. FedInvest prices are the Treasury’s own quotes for government accounts, not broker trades, and one bond’s year is one example, not a rule for every bond.
When current yield is the right number
For an income budget. If the question is how much cash a holding pays each year per dollar invested today, current yield answers it directly.
Near par. At $95 to $100 the median gap on 30 Oct 2026 was 0.62 point, the smallest of the four discount groups in the table above.
For a bond with no maturity date. A perpetual bond never repays principal, so there is no gain or loss to par to count and current yield is the natural measure.
When it fails
Sorting a bond list by current yield ranks the wrong thing. A premium bond with a big coupon floats to the top. On 30 Oct 2026 the 6.125% Treasury due 2027 showed 6.04%, higher than any Treasury’s yield to maturity on the par curve that day, yet held to maturity it returned 4.68%.
Deep-discount bonds look poor on it. The 1.25% bond due 2050 showed 2.78%, the kind of number a screen would pass over, while its yield to maturity was 5.42%.
A rising current yield is easy to misread as rising income. Over the 13 month-ends it climbed from 2.51% on 31 Oct 2025 to 2.94% at its peak on 30 Sep 2026 with no change in the coupon; the only thing that changed was a lower price.
Comparing different maturities on it mixes two questions. A one-year and a 23-year bond with the same coupon and price show the same current yield and very different futures.
It says nothing about default. In corporate bonds a high current yield can mean the market doubts the coupon will keep arriving, which no yield figure can tell you on its own.
Questions people ask
How do you calculate current yield?
Divide the annual coupon in dollars by the bond’s current price and multiply by 100. For the 1.25% Treasury due 2050 at $44.9375 on 30 Oct 2026: $1.25 / $44.9375 = 2.78%.
Is current yield the same as YTM?
No. Current yield counts only the coupon; yield to maturity also counts the gain or loss back to $100. On 30 Oct 2026 they were within a quarter point on 38 of 296 Treasury notes and bonds.
What is current yield vs nominal yield?
Nominal yield is the coupon rate: the coupon divided by $100 of face value. Current yield divides the same coupon by today’s price, so they match only at a price of $100.
What is the current US Treasury yield?
The Treasury’s par yield curve for 30 Oct 2026 put the 10-year yield at 4.94%, the 2-year at 4.56% and the 30-year at 5.31%. Those are yields to maturity for bonds priced at par, not current yields.
Related
Start with yield to maturity, the full measure this page keeps comparing against. Coupon yield explains the fixed number on top of the fraction, and the yield curve page shows how the par yields quoted above fit together across maturities.
Current yield is the bond equivalent of dividend yield, and it carries exactly the same trap: the denominator moves every day and the numerator moves once a decade, so almost everything you see in the figure is the price falling rather than the income improving.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.