Infinance,mortgage yield is a measure of theyield ofmortgage-backed bonds. It is also known as cash flow yield. The mortgage yield, or cash flow yield, of a mortgage-backed bond is the monthly compoundeddiscount rate at which thenet present value of all future cash flows from the bond will be equal to the present price of the bond.^[1]

When the coupon payments are made on a monthly basis, the mortgage yield can be calculated as:

${\displaystyle \text{Mortgage Yield: ri such that P}=\sum _{n=1}^N\frac{C(t)}{(1+ri/1200{)}^{t-1}}}$

Where

t - the time of the cash flow

n - each instance of coupon payment

r - the discount rate

${\displaystyle C(t)}$ - the net cash flow (the amount of cash) at time t.

Mortgage yields are primarily a tool for comparing mortgage bonds with conventional bonds. The difference between the mortgage-backed bond's yield (generally converted to semi-annually compoundedyield to maturity) and a conventional bond is called the "yield spread" or "I-spread."

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