chinazh
Credit investing glossary

Yield to maturity

Expressed simply, the yield to maturity (YTM) of a bond is the annualized return that a bond investor would receive from holding the bond until maturity. It is also referred to as the redemption yield or the book yield.

More technically, it is the internal rate of return required for the present value of all future cash flows from the bond – its coupon payments and the principal – to equal the prevailing market price of the bond. 

The calculation of the YTM is an iterative process, in which a range of rates are substituted into the formula. The YTM is determined once the calculated price (the present value of future cash flows) equals the current market price.

The YTM can be used to evaluate the current valuation of a bond by comparing it with its coupon rate, where the latter is a simpler calculation of the annual coupon payments divided by the face value of the bond. 

Consistently at the forefront of credit management
Consistently at the forefront of credit management
Credit investing

If the YTM is higher than the coupon rate, the bond is trading at a discount. If the YTM is below the coupon rate, the bond is trading at a premium. 

Furthermore, as the YTM is calculated as an annualized rate, it can be used to compare the relative attractiveness of bonds with different coupons and maturities.

拥抱投资业的可持续发展革命
拥抱投资业的可持续发展革命
全球兴起向可持续发展深度转变的浪潮,这对资产所有者和资产管理者而言意味着什么?Victor Verberk在Top1000基金大会的开幕式上作出了解答。
09-05-2022 | 市场观点
传统车企如何应对“电动大潮”?
传统车企如何应对“电动大潮”?
车企压力剧增背后:监管加码、消费者偏好改变、竞争对手入局。
09-07-2021 | 市场观点
信用债展望:警惕经济过热
信用债展望:警惕经济过热
在荷宝看来,投资的要义并不在于对某一个时间的具体价格预测,更重要的是,综合考虑未来可能发生的各种情形,以及判断有哪些情况已经被反应在估值当中。
30-04-2021 | 季度展望