Yield to maturity

Yield to maturity (YTM) for a bond fund is the weighted average of the yields to maturity of the bonds it holds: the annualised return each bond would deliver if bought at its current price and held to maturity with all coupons paid. It is a snapshot at a date, quoted gross of fees and in the portfolio's base currency. Factsheets may also show yield to worst, which assumes callable bonds are redeemed at the least favourable date, and is therefore the more conservative figure.

YTM is not the same as distribution yield, which measures the income actually paid out over the past twelve months relative to the NAV.

Why it matters

For a bond fund, YTM is the best single indicator of what the portfolio is currently priced to earn, and it moves inversely with prices: when yields rise, existing holdings fall in value, by roughly the fund's duration times the yield change. Read together with duration and credit quality, it gives a compact picture of a bond fund's return potential and risk, which is why fixed income screeners lead with these three numbers.

In the API

The headline yield and its companion metrics are returned for bond and multi-asset funds where the fund house publishes them.

json
{
  "headlineMetrics": {
    "yieldToMaturity": 4.35,
    "modifiedDuration": 6.2
  },
  "profile": { "creditQuality": "investment grade", "rateSensitivity": "medium" }
}

Example values; yield is a percentage per year. The maturity and rating breakdowns are in maturity and creditQuality.

Common pitfalls

• YTM is gross; subtract the ongoing charges to approximate what investors could receive.
• It assumes no defaults. High-yield portfolios will earn less than their YTM if defaults occur.
• A hedged share class earns the yield adjusted for the interest rate differential between currencies.