The Average Rate of Return on Long-Term Corporate Bonds

Written by meryl baer
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The Average Rate of Return on Long-Term Corporate Bonds
An investor wants to ensure that a bond purchase results in the best possible return available. (Comstock/Comstock/Getty Images)

In the case of bond investors, shoppers want the best yield available for a particular type of bond. One way to figure out whether a bond's yield is comparable to similar ones in the market, you need to compare a particular bond's return with comparable bond average returns. Benchmark indexes exist to compare a bond's return with the industry average at a specific point.

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Rate of Return

The rate of return is the return on an investment. Bond prices vary, so rates of return are assumed to be the current return computed on an annual basis. When comparing bonds, financial websites usually cite a bond's current yield. Current yield is the bond interest rate divided by the current bond price. An internal rate of return includes the purchase price of the bond, the interest received and the principal returned at maturity.

Corporate Bond Indexes

The Financial Industry Regulatory Authority and Bloomberg publish corporate bond indexes based on the most active corporate fixed rate bonds represented by the FINRA TRACE reporting system. The index is updated after the close of each trading day. The indexes are rebalanced monthly and can be found at on the Businessweek/Bloomberg website. The average yield for the investment-grade corporate bond index as of April 21, 2011, was 4.59 per cent with an average bond lifespan of 4.76 years and an average coupon of 5.84 per cent. The average yield for the high yield bond index as of April 21, 2011, was 7.78 per cent with an average duration of 3.57 years and an average coupon of 7.14 per cent.

Barclays Index

The Barclays Capital U.S. Corporate Bond Index is another composite bond index. The index is available on the Wall Street Journal Market Data Center. As of April 25, 2011, the 52-week return on double-AA rated corporate bonds was 3.20 per cent, and the 52-week return on triple-B rated corporate bonds was 4.48 per cent.

Other Sources of Bond Data

The Yahoo Finance site has a table with the two-, five- and 10-year returns on A, AA and AAA-rated corporate bonds. The current yield as of April 25, 2011, on five-year AA-rated corporate bonds was 2.87 per cent. The website also lists current yields on Treasury securities and average yields on municipal bonds. CNN Money's site presents data on investment grade and high yield corporate bonds. An IRS website provides a monthly average on corporate bond yields and presents historical data as well. Many brokerage firm websites contain updated bond information. The Edward Jones site lists current yields on corporate bonds as well as municipal bonds, money market funds, government agencies and Treasuries.

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