YTM (Yield to Maturity) — Bond Detail
Yield to Maturity (YTM) is the annualised internal rate of return a bond buyer earns if the bond is held until it matures and every coupon is reinvested at the same YTM. It is the single number that summarises a bond's price, coupon, face value, and
Yield to Maturity (YTM) is the annualised internal rate of return a bond buyer earns if the bond is held until it matures and every coupon is reinvested at the same YTM. It is the single number that summarises a bond's price, coupon, face value, and time to maturity.
Worked INR example
A 5-year SBI bond, face value ₹1,000, coupon 7% paid annually, trades at ₹960. You receive ₹70 each year for 5 years plus ₹1,000 at maturity. Solving for the discount rate that makes the present value of these cashflows equal to ₹960 gives YTM ≈ 7.99%. So even though the coupon is 7%, you earn ~8% because you bought at a discount.
When to use
- Comparing two bonds with different prices, coupons, and maturities on a like-for-like basis
- Building a bond ladder where each rung's YTM is locked in at purchase
- Deciding between holding to maturity vs. selling pre-maturity
SEBI / RBI caveat
YTM assumes you can reinvest every coupon at the same YTM — rarely true in practice. SEBI mutual-fund factsheets disclose portfolio YTM as on month-end; this is a snapshot, not a guaranteed return. For G-Secs, RBI's NDS-OM screen shows live YTM.
Related terms: Coupon Rate, Modified Duration, Credit Spread.