Australian Bond Exchange

Yield to maturity and coupon rate are the two main measures you need to take into account when evaluating bonds for investment.

The coupon rate shows you what your annual return from the bond will be and that means you are able adequately to plan your income into the future. Every bond will show you their associated coupon rate.

But you also need to investigate more than just the coupon rate. The yield to maturity is used to understand how your portfolio will be impacted overall by the investment in the bond.

Unfortunately the yield to maturity measure changes through the life of the bond based on market factors.

While a bond might be paying a high coupon rate, if you pay too much for the bond your overall return is reduced and your portfolio might not grow.
In some cases, it might be better to buy a cheaper bond, with a lower coupon rate. This will reduce your regular income, but allow your portfolio to grow into the future.

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