How do investors compare different bonds?

Investors compare different bonds primarily by looking at their yields, which reflect the return an investor can expect from holding the bond to maturity. The yield is a critical factor because it incorporates the bond's interest payments (coupon payments) relative to its current market price, providing insight into its profitability. When yields are compared across various bonds, investors can assess which bonds offer better returns based on their risk levels.

While comparing maturity dates, credit ratings, and market conditions can provide valuable context about bonds, yield is the most direct measure of expected financial performance. Maturity dates can influence risk and interest rate sensitivity but do not provide a clear measure of returns. Credit ratings indicate the likelihood of default but do not account for how much an investor can potentially earn. Market conditions can impact bond prices and yields but do not directly compare the bonds based solely on expected returns. This focus on yield allows investors to make informed decisions about which bonds align best with their investment strategies and risk profiles.