The yield of Spanish government 10-year bonds rose to a high of seven percent on Thursday, alarming the rest of the Eurozone. But what does 'bond yield' mean?
Governments borrow money from the markets by selling bonds. The yield is the amount that an investor can expect to get back, and it is implied by the bond's current market price.
The yield indicates how much the government that is issuing the bonds will have to pay in interest. So if a yield goes up, it becomes more expensive for the government to borrow money from the markets.