yield to maturity

Definition

The total return anticipated on a bond if held until it matures, accounting for current price, par value, coupon interest, and time to maturity. It's what you'll earn assuming the issuer doesn't default, which is a bigger assumption than bond investors like to admit.

Example Usage

The bond's yield to maturity of 8% looked attractive until we noticed the company's debt-to-equity ratio and sudden executive departures.

Origin

Fixed income analysis terminology formalized in mid-20th century as bond markets became more sophisticated

Fun Fact

YTM calculations assume you can reinvest coupon payments at the same rate, an assumption that holds true in spreadsheets and literally nowhere else.

Source: Fixed income securities analysis

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