What is the Average Yield on High-Grade Corporate Bonds as of Now?
Yahoo! Finance would list it as 3.30 for the 20 year corporate AAA bonds. This is using the criteria from the Wikipedia link you stated in the initial question.
"Even though the article doesn't actually use the word ""discount"", I think the corresponding word you are looking for is ""premium"". The words are used quite frequently even outside of the context of negative rates. In general, bonds are issued with coupons close to the prevailing level of interest rates, i.e. their price is close to par (100 dollar price). Suppose yields go up the next day, then the price moves inversely to yields, and that bond will now trade at a ""discount to par"" (less than 100 dollar price). And vice versa, if yields went down, prices go up, and the bond is now at a ""premium to par"" (greater than 100 dollar price)" A large number of bond holders decide to sell their bonds.  If they all decide to do this at the same time then there will be a large supply of bonds being sold in the market.  This will drive down the price of the bonds which will increase yields. Why do bond yields move inversely to bond prices? You purchase a $100 bond today that yields 5%.  You spent $100.  The very next day the same bonds are being sold with a yield of 10%.  If you wanted to sell your bond to someone you would have to sell it so it competed with the new bonds being sold.  You could not sell it for $100 which is what you paid for it.  You would have to sell it for less than the $100 you paid for it in order for it to have the equivalent yield of the new bonds being sold with a 10% yield.  This is why bond yields move inversely to bond prices. Why does rising yields increase the cost of borrowing? If someone is trying to sell new bonds they will have to sell bonds that compete with the yields of the current bonds already in the market. If yields are rising on the existing bonds then the issuer of the new bonds will have to pay higher interest rates to offer equivalent yields on the new bonds. The issuer is now paying more in interest making it more expensive to borrow money. What are the incentives for the bond vigilante to sell his/her bonds? One reason a bond holder will sell his/her bonds is they believe inflation will outpace the yield on the bond they are holding.  If a bond yields 3% and inflation is at 5% then the bond holder is essentially losing purchasing power if they continue to hold onto the bond.  Another reason to sell would be if the bond holder has doubts in the ability of the issuer to repay the interest and/or principal of the bond. Yield is the term used to describe how much income the bond will generate if the bond was purchased at a particular moment in time. If I pay $100 for a one year, $100 par value bond that pays 5% interest then the bond yields 5% since I will receive $5 from a $100 investment if I held the bond to maturity. If I pay $90 for the same one year bond then the bond yields 17% since I will receive $15 from a $90 investment if I held the bond to maturity. There are many factors that affect what yield creditors will accept: It is the last bullet that ultimately determines yield.  The other factors feed into the creditor’s desire to hold money today versus receiving money in the future.  I desire money in my hand more than a promise to receive money in the future.  In order to entice me to lend my money someone must offer me an incentive.  Thus, they must offer me more money in the future in order for me to part with money I have. A yield curve is a snapshot of the yields for different loan durations.  The x-axis is the amount of time left on the bond while the y-axis is the yield.  The most cited yield curve is the US treasury curve which displays the yields for loans to the US government.  The yield curve changes while bonds are being traded thus it is always a snapshot of a particular moment in time. Short term loans typically have less yield than longer term loans since there is less uncertainty about the near future. Yield curves will flatten or slightly invert when creditors desire to keep their money instead of loaning it out.  This can occur because of a sudden disruption in the market that causes uncertainty about the future which leads to an increase in the demand for cash on hand. The US government yield curve should be looked at with some reservation however since there is a very large creditor to the US government that has the ability to loan the government an unlimited amount of funds. "What is a bond price?  A bond is an asset, and like any tradeable asset it has a price.  If I hold $10K face value of a certain GM bond, then I would be willing to sell it at some price, which may be more or less than $10K.  Whoever is willing to sell it for the lowest amount determines the price.  The price is determined by the market, just as all prices are.  It's what you can sell a bond for.  Bond prices may be quoted in various funny ways, like as a discount or premium relative to the face value or as a premium over a treasury, but at the end it all should be converted to how much you have to pay today.  In this case, it's how much you would pay today to get a set of future coupon and principal payments. What is Yield to Maturity?  A bond is a contract entitling you to a certain set of predefined cash flows.  If you take that set of cash flows and discount them using a single rate at all maturities such that the discounted value is equal to the price, the single rate you have identified is the YTM.  Mathematically, this is the same as finding the IRR (internal rate of return) of some set of cash flows.  In this case the cash flows are the coupons and principal repayment.  Other bond concepts.  Note that the other aspects of a bond, like maturity, coupon rate, and face value, are immutably written into the bond contract.  All they do is define what payments the bond entitles the owner to.  They don't say how much someone would pay today in order to be entitled to those payments.  One can't know how much a future payment is worth without discounting.  If you know the appropriate discount rate at every relevant maturity, you could calculate the fair price of a bond.  That's the other direction.  YTM looks at the market price and associated cash flows and imputes what single discount rate would make that price fair. What is YTM good for? Recall what I said about IRR above.  Why would anyone want to know what discount rate equates the cash flows of a project to its cost?  Because it's an easy way to summarize how profitable the project is expected to be. YTM is a quick way to summarize the yield one would get on a bond if they were to buy it today and hold to maturity.  If one bond has a higher YTM than another, than heuristically we believe it pays out more and should be associated with greater risk if the market is working properly.  It can be used to compare bonds or to look at how changes in bond prices are affecting expected yields.  Ask yourself, how would you compare two different bonds with different maturities and coupon rates?  Which one is riskier or more profitable?  The simplest way to summarize this information is with the yield to maturity.  YTM is used frequently enough that when you just say a bond's ""yield,"" people will assume you are talking about its yield to maturity. What is YTM not good for?  One thing to be wary of is using YTM as a discount rate.  It looks like a discount rate but it works for that bond and that bond only.  In reality each individual coupon payment has a true discount rate, and the discount rate at each horizon is different from each other horizon.  Those are true discount rates that can be applied to any cash flow of similar risk to get the right price.  We can think of YTM as some kind of average of those discount rates that produces the correct price for that bond only.  You should never use it for discounting something else." "A junk bond is, broadly, a bond with a non-negligible risk of default.  (""Bond"" ought to be defined elsewhere, but broadly it's a financial instrument you buy from a company or government, where they promise to pay you back the principal and some interest over time, on a particular schedule.) The name ""junk"" is a bit exaggerated: many of them are issued by respectable and reasonably stable businesses. junk bonds were required to do large leveraged buyouts.  This means: the company issued fairly risky, fairly high-yield debt, to buy out equity holders.  They have to pay a high rate on the debt because the company's now fairly highly geared (ie has a lot of debt relative to its value) and it may have to pay out a large fraction of its earnings as interest. What is a junk bond and how does it differ from a regular bond?  It's only a matter of degree and nomenclature.  A bond that has a credit rating below a particular level (eg S&P BBB-) is called junk, or more politely ""non-investment grade"" or ""speculative"".  It's possible for an existing bond to be reclassified from one side to another, or for a single issuer to have different series some of which are more risky than others.  The higher the perceived risk, the more interest the bond must pay offer in order to attract lenders. Why is there higher risk/chance of default? Well, why would a company be considered at higher risk of failing to repay its debt?  Basically it comes down to doubt about the company's future earnings being sufficient to repay its debt, which could be for example:" Depending on the specific bond, here is the official info. http://www.wilmingtontrust.com/gmbondholders/index.html Bottom line, it won't be determined for a while yet, as the filing with the Bankruptcy Court still has lots of blanks. A 20% dividend yield in most companies would make me very suspicious. Most dividend yields are in the 2-3% range right now and a 20% yield would make me worry that the company was in trouble, the stock price had crashed and the dividend was going to be cut, the company was going to go out of business or both. Are you geometrically linking the spot rates for each spot period over of the next year? I.e. are you looking at the spot strip, or just taking today's spot rate and annualizing it?  If you are looking at the spot strip, then a YTM for a bond maturing in one year should equal the return from investing in rolling one month spot rates for the next year - more or less. If this variance is large, then there is scope for arbitrage.