Yield to maturity
Also called YTM
The yearly return you'd earn on a bond if you bought it at today's price and held it to the end.
Yield to maturity, or YTM, is the return a bond would give you each year if you bought it at today’s price and held it to maturity. It differs from the coupon because the price moves. When rates rise and a bond’s price falls, its YTM rises for a new buyer. Debt funds publish a portfolio YTM, a rough guide to what their bonds would earn before costs. See bonds and government securities.
Questions people ask
What is yield to maturity?
Yield to maturity, or YTM, is the yearly return on a bond if you buy it at its current price and hold it until it matures, collecting every coupon and the face value at the end. It rolls the interest and any gain or loss on the price into one figure.
How is YTM different from the coupon?
The coupon is the fixed interest on the bond's face value. YTM depends on the price you pay. Per the RBI's primer, when a bond trades below face value its YTM is higher than the coupon, and when it trades above face value its YTM is lower.
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