Current Yield

Current Yield equation is used to calculate the returns that an investor will get on a bond based on its current price if held for a year . It may also be used with risk ratings and calculations to compare various bonds.

EXAMPLE

A bond is issued at $100 and it  has an aggregate annual coupon of $10. The current yield on this particular bond would be 10%. Given that the same bond is currently selling for $90 based on today's market rates, the current yield will be 11.11% ( i.e. $10/$90)

Note: The price of a bond going down is an indicator that the market rates or bond rate are going up.