YTM

Full form: Yield to Maturity

Investments

YTM is the total annualised return if you buy a bond today and hold to maturity, with all coupons reinvested at the same rate. The single most important metric for comparing bonds -- like CAGR is for equity.

In detail

Debt mutual fund YTMs are disclosed in fund factsheets. When RBI cuts rates, bond prices rise and existing bond YTMs fall. When rates rise, bond prices fall and YTMs rise -- this inverse relationship makes long-duration bond funds volatile. RBI Retail Direct shows YTM for all G-Secs being auctioned.

Formula

Approximate YTM = [Coupon + (Face value - Price) / Years] / [(Face value + Price) / 2] Example: Rs 1,000 bond at Rs 950, Rs 70 coupon, 5 years: YTM = [70 + 10] / 975 = 8.21% (approximate)

Real-life example

🇮🇳 India example

A Nifty AAA bond fund shows portfolio YTM of 7.8% with 3-year average maturity. If rates stay constant, fund delivers approximately 7.8% over 3 years regardless of short-term price movements.

Frequently asked questions

What is the YTM of G-Secs for retail investors? ▼

Government securities via RBI Retail Direct: 6.5-7.5% depending on tenure (2025). AAA corporate bonds: 7.5-8.5%. Gilt mutual funds: portfolio YTM approximately 7-7.5%.