Three Ways to Measure a Bond's Yield — and Why Two Broker Apps Disagree on the Same Issue

A bond's yield is not a single number but several, and each one answers a different question. Current yield shows how much the coupon brings in relative to the money you actually spent. Simple yield to maturity adds the gap between your purchase price and the face value, then spreads the result across the remaining term. Effective yield to maturity is the same idea expressed with compounding: it assumes the coupons you collect are put back to work. Only the last of the three is fit for comparing one issue against another — the first two cannot do that job.

What follows is the calculation step by step, and then an explanation of where the discrepancy between broker apps on one and the same security comes from.

Step 1. Work out how much money actually leaves your pocket

The price in the order book is not a sum of money — it is a share of the face value. That figure is the clean price, and you will pay more than it: on top of it the seller receives accrued interest, the slice of the coupon that has built up since the last payment date. The two together are called the dirty price, and it is the dirty price that belongs in the denominator of every calculation that follows.

money paid for one bond = face value × price in percent / 100 + accrued interest

The accrued interest comes back to you with the next coupon, but you hand it over today — and if you divide the coupon by the clean price alone, the yield you get is higher than the real one. This is the most common back-of-the-envelope mistake, and it always errs in the flattering direction. How the payment itself is structured is covered separately: Coupons and accrued interest: why you pay more than the price.

Step 2. Current yield

The first of the three numbers takes one operation: divide the annual coupon by the money spent on the security.

current yield = annual coupon / money paid for one bond

It answers the question "how much is dripping in on what I put up" and answers nothing else. It does not see the return of face value: a bond bought below par will also hand you the difference at maturity, while one bought above par will give that difference back. It does not see the term either, which is why an issue maturing in a year and an issue maturing in a decade look identical through this lens.

Step 3. Simple yield to maturity

The second number adds the gap against face value to the coupons and rescales the result to an annual basis.

simple yield to maturity =
    (face value - money paid for one bond + remaining coupons)
    / money paid for one bond
    × (days in the year / days to maturity)

Everything you will receive is accounted for here, but without compounding: the calculation assumes a collected coupon simply sits idle. On a short bond the gap against the effective figure is barely visible; on a long one it is substantial, and the longer the term, the further the two methods drift apart.

Step 4. Effective yield to maturity

The third number is the one the exchange and the brokers mean when they say "yield to maturity" with no qualifier. There is no one-operation formula for it: it is the rate at which the sum of all future payments, discounted to today, equals the money you spent.

money paid for one bond = coupon / (1 + r)^t + ... + (coupon + face value) / (1 + r)^T

The equation is solved by iteration — a spreadsheet has a ready-made function for exactly this, and on the issue page the number is already calculated for you. What matters more is understanding the assumption behind it: the calculation presumes that every coupon received is reinvested at the very same rate. In real life that rarely holds, and the deviation is known as reinvestment risk. What this measure actually tells you is unpacked in a separate piece: Yield to maturity: the only honest number a bond has.

Step 5. Subtract tax and commissions

The coupon is taxed in full, not merely the portion "above the policy rate" as was the case before the tax reform. The difference between the purchase price and the redemption amount is income too. A resident pays 13% up to the annual threshold of RUB 2.4m and 15% on anything above it; the broker withholds the tax as fiscal agent. The long-term holding relief — a holding period of at least 3 years — applies only to the price difference and does not touch the coupon at all. The practical side is covered here: Tax on coupons: how it changes the choice of bond.

To the tax add broker and exchange commissions: on a short bond they eat a noticeable share of the result, and the app usually shows yield before every deduction.

Why brokers show different numbers

A discrepancy on one and the same issue between two apps is normal, and it has several causes.

A different price at the base. One screen takes the last trade price, another the volume-weighted price of the previous trading session. On an illiquid issue with no trades today, those are different quantities. Worse still: on such a day the exchange returns a zero yield, and a screen that cannot tell zero from missing prints it as fact.

A different method. Simple and effective yield are computed from the same money but give different answers, and not every interface labels which of the two it is showing.

A different end date. For a bond with a put, yield is calculated to the put date rather than to maturity: an offer gives the holder the right to present the bond to the issuer early, and the coupon after that date may change. Yield to maturity on such a security is a figure the holder will most likely never receive. How to read these issues: The put date: miss it and you are left holding a different bond.

A floating coupon. For issues with a variable coupon the future payments have not been announced yet, so they have no yield to maturity whatsoever. A dash in that column is an honest answer, not a gap in the data.

A different day-count basis. Calendar and trading bases produce slightly different annualised figures from identical cash flows.

What the yield does not contain

The number holds no credit risk: the elevated yield of a corporate issue is payment for the chance that the issuer does not pay, and it cannot be compared head-to-head with a government bond (OFZ and corporate bonds: what the premium pays for). Nor does it contain the price sensitivity to interest rates — that is the job of duration, and it should be read alongside (Duration: why long bonds fall harder).

Check amortisation separately: if the face value is retired in instalments, money comes back to you ahead of the final date, and the "coupons plus face value at the end" scheme does not apply to such a bond. We do not display the principal repayment schedule on the issue page — you need to look it up in the issuer's offering decision.

Where to find the numbers already calculated

The coupon, accrued interest, maturity date and calculated yield are shown on every issue page — for instance SU26238RMFS4. The full list of traded securities with filters is the bond catalogue, and government issues are kept separately in the OFZ section. Definitions of the terms used above are gathered in the glossary, and the remaining material on the subject sits in the Bonds section.