/

Yield to maturity (YTM)

Yield to maturity

What is yield to maturity and why is it useful?

Yield to Maturity (YTM) calculates the annualised return you would get on a bond if you held it until its redemption date. It’s a handy way to compare different bonds, as it lets you see which bond might give the highest return over time, taking into account all aspects of the bond, like its price, maturity date, and face value.

You might buy the bond at a price that’s different from its face value. When the price is less than its face value, the bond is trading at a “discount”. When it’s more than its face value, it’s trading at a “premium”.

If you’re buying a bond with a maturity less than or more than a year, remember that YTM is an annualised figure. So, for example, if you have a 28-day UK Treasury Bill, you will get the annualised YTM, but only for the 28 day period between when you buy it and it matures.

More terms

DMO

The United Kingdom Debt Management Office. It’s an executive agency responsible for managing the government’s debt and cash needs, primarily through issuing gilts and Treasury bills.

Money weighted rate of return

Learn what Money Weighted Rate of Return or MWRR stands for in finance.

Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.

Synthetic ETFs

An ETF that that reproduces the return of an index through the use of swaps.

Yield

Income from an investment as a percentage of its current price.

NASDAQ

A US stock exchange specialising in the shares of technology companies.

Dividends

Find out what dividends are and how they can contribute to the growth of your investment portfolio.

Year to Date (YTD)

A period of time that starts with the first day of the current calendar year and ends with today.

Oligopoly

A situation in which a market or industry is controlled by a small group of companies.

You’re just minutes away from commission-free investing

When you invest, your capital is at risk

Freetrade does not provide investment advice and individual investors should make their own decisions or seek professional advice. The value of investments can go down as well as up and you may receive back less than your original investment. Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority (FCA reg. no. 783189). Registered in England and Wales (no. 09797821).

© 2026 Freetrade, All rights reserved. The Apple logo is a trademark of Apple Inc. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.