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Updated 2mo ago.
Updated 2mo ago.
The current yield is a bond's annual income (its coupon) divided by its current market price. Unlike the coupon rate which is fixed, the current yield varies based on the price you pay for the bond.
Suppose a bond has a 4% coupon and a $1,000 face value ($40/year in interest). If the bond's price drops to $950 on the market, the current yield becomes: $40 ÷ $950 = 4.21%.
This is why when interest rates rise, bond prices fall but their current yields increase. The ZAG.TO ETF displays a current yield that reflects the weighted average of all the bonds it holds.
The current yield helps you compare income from different bonds or bond ETFs. It is more useful than the coupon alone because it accounts for the actual price you pay.