Why Bond Charts Use Yields to Compare Fixed-Income Securities

# Why bond (individual or their benchmark index) graphs predominantly display yield rather than price?


# Why bond (individual or their benchmark index) graphs predominantly display yield rather than price?












- Yield graphs seem to be predominant.

- This is in contrast to price graphs in equity based products.

- I can work out the price if I know the face value, but still -- would imagine for consistency purposes price would be a frequent value measure for both products.

## Answer by Kch (score 3, accepted)

https://quant.stackexchange.com/a/36389

You can't show the term structure easily with prices. Say you have 2 bonds, a 5 year at 2% and a 10 year at 3%. If both have coupons of the same, so no premium or discount, they both will trade at $100. There's then no way to see how interest rates should evolve in that chart. This is why we show spot rates--it helps standardize coupon and face value.

Also, in fixed income we like to compare fixed income products to non-bond securities. You can't compare a bond to the Fed Funds rate on a price basis, for example.

## Answer by Peter (score 2)

https://quant.stackexchange.com/a/36415

Investing in equities is different than investing in bonds. With equities, you don't know the outcome. When you invest today and sell in five years, you don't know if the investment will be positive or negative.

Investing in bonds is different, because you know that the outcome is 100 (with the exception that the bond will default). As you know the actual price and the annual yields income in the next years, you are able to calculate the ratio of INPUT / OUTPUT, and hence the yield.

With equities, you can also calculate your ratio Input / Output, but only after selling your equities. With bonds, you can calculate it before investing.

## Answer by A.L. Verminburger (score 0)

https://quant.stackexchange.com/a/40231

I would like to offer an additional opinion why price time series dominate equity and yield values (not necessarily the whole term structure) -- fixed income.

$$\text{total return} = \text{yield} + \text{capital gain}$$

In equity (say SNP 500) capital gain (price series being a quick proxy) usually dominates total return $$\text{total return} \approx \text{capital gain}$$

In fixed income (in a perpetual sense) it is the yield (point value beeing sufficient) that drives the total return $$\text{total return} \approx \text{yield}$$

As a side note: in fixed income the yield (taht is guaranteed) tends to have rich term structure giving the yield curve and the premium within it; in equity it is fairly boring -- essentially a flat line corresponding to some average dividend yield value (an expectation rather than a guarantee).