InvestmentFinancial Glossary
Yield to Maturity (YTM)
Definition
The total return anticipated on a bond if it is held until it matures, expressed as an annual percentage. YTM accounts for the bond's coupon payments, face value, current market price, and time to maturity. It is the most comprehensive measure of a bond's expected return.
Why It Matters
YTM is the key number to compare debt mutual funds and bond investments. A debt fund's portfolio YTM gives you a reasonable estimate of expected returns over the fund's average maturity period (assuming no defaults). Compare YTM across funds of similar duration to identify the best risk-adjusted option.