Glossary
Yield to maturity (YTM)
The annual return a bond delivers if bought at today’s price and held to maturity, counting every coupon plus the gain or loss to face value.
On this page
Yield to maturity (YTM) is the single annual rate that makes the present value of a bond's remaining payments, all its coupons plus its face value at maturity, equal to its current price. Put simply, it is the return you would earn by buying the bond now and holding it to the end, assuming every payment arrives on time. It is the standard way bond yields are quoted and compared, because it accounts for both income and the pull of the price toward face value.
How it works
The exact YTM is solved by trial and error or a calculator; there is no closed-form answer.
What it assumes
YTM assumes you hold to maturity, that the issuer pays in full, and that every coupon is reinvested at the same yield. If rates fall, reinvested coupons earn less and the realized return comes in below the quoted YTM. For a bond the issuer can redeem early, analysts also quote yield to call and use the lower of the two, the yield to worst. A high YTM on a corporate bond often reflects credit risk, not a bargain: it is the promised yield, not the expected one.