What is the primary significance of a bond's yield?

The primary significance of a bond's yield is that it represents the bondholder's return. Yield effectively reflects the income that an investor can expect from holding the bond until maturity, taking into account the bond's coupon payments and any potential capital gains or losses based on the bond's current market price relative to its face value.

Understanding yield is crucial for investors as it helps them assess the attractiveness of a bond compared to other investment opportunities. A higher yield often indicates a higher potential return, which can draw investors' attention, especially in relation to the risk they are willing to accept. This metric serves as a key indicator for investors looking to maximize their returns from fixed-income investments.

While the interest rate of the bond, its trading price, and the issuer's credit risk are all related to the bond market, they do not directly capture the bondholder's perspective of their return, which is the essence of what yield signifies.