Money Terms in Plain English.

Y

Yield

The income from an investment compared with its price.

In plain English:The yearly income from an investment, like dividends or interest, divided by its price.

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Yields can be quoted in different ways. A high yield can mean higher risk.

For example: A share costs £10 and pays 40p a year in dividends, a yield of 4%.

Yield curve

A line comparing what short and long government loans pay.

In plain English:A line showing what government loans pay for different lengths of time. When short loans pay more than long ones, it can be a warning of recession.

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Investors watch it for signs about the economy. It's often shown for gilts and US Treasuries.

For example: In 2022 and 2023 the US yield curve inverted, with two-year yields above ten-year ones.

Yield farming

Moving crypto between DeFi pools to earn the highest rewards.

In plain English:Moving crypto between different DeFi apps to chase the highest rewards. It's very risky, with hacks and scams common.

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Rewards are often paid in new tokens that can lose value. Gas fees eat into returns.

For example: Someone moves coins between pools chasing a 50% reward rate, then loses most of it when the reward token crashes.

See also: DeFi (decentralised finance)

Yield to maturity

The yearly return from buying a bond today and holding it to the end.

In plain English:The yearly return you'd get if you bought a bond today and held it until it pays you back, counting interest and any gain or loss.

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It assumes coupons are reinvested at the same rate. It's the best measure for comparing bonds.

For example: A bond priced at £95, paying £3 a year and repaying £100 in two years, has a yield to maturity of about 5.7%.

Article inside Foliopeak: Bonds