Nominal Yield
A bond's stated yield without adjusting for inflation — the face-value return before accounting for the erosion of purchasing power.
Formula
Nominal Yield ≈ Real Yield + Expected Inflation (Fisher equation)
Nominal yield is the raw yield quoted for a bond — the coupon rate or YTM expressed as a percentage without any inflation adjustment. When the market quotes "the 10-year yields 4.50%," it is quoting the nominal yield.
Nominal yield is composed of the real yield plus expected inflation (the breakeven inflation rate). Decomposing nominal yields into these two components tells traders whether a yield move is driven by changing growth/real rate expectations or shifting inflation pricing.
Related Terms
Basis Point
One hundredth of one percentage point (0.01%) — the standard unit for quoting changes in interest rates, yields, and credit spreads.
BeginnerBond Yield
The return an investor earns by holding a bond — driven by its price, coupon, and time to maturity. Moves inversely with price.
BeginnerBreakeven Inflation Rate
The inflation rate at which a nominal Treasury and a same-maturity TIPS deliver equal returns — the market's priced-in inflation expectation.
AdvancedReal Interest Rate
The nominal interest rate minus expected inflation — the true, inflation-adjusted return on lending or cost of borrowing.
IntermediateReal Yield
A bond's nominal yield minus expected inflation — the true inflation-adjusted return a bondholder earns for lending money.
AdvancedTIPS
U.S. Treasury bonds whose principal adjusts with CPI, so the investor is repaid in inflation-protected dollars and earns a real yield.
IntermediateYield to Maturity
The total annualized return an investor earns if they hold a bond to maturity — accounting for coupon payments, price paid, and time remaining.
Intermediate