Bond yield is the rate of return or interest paid to the bondholder, and it is also the premium that investors need to pay to hold government or corporate debt. Like interest on loans the local bank charges borrowers, a bond is a loan that has the same function. When investors buy bonds, they essentially lend money to bond issuers.
Bond yields can also reflect investors’ confidence. If the demand for bonds is low, its yields will increase to attract more buyers. If there is a high demand for a bond, bond yields will be low because investors are confident that they will get paid back at maturity or they believe this is a safe place to hold their assets.