Gain real-time tracking of call dates, authorizations, ratings, and outstanding debt.
Always have a clear, real-time view of your financial obligations.
Key Bond Terminology
- Face Value/Par Value: The amount the bond issuer agrees to repay at maturity
- Coupon Rate: The annual interest rate paid on the bond's face value
- Bond Price: The current market price of the bond (expressed as a percentage of par)
- Maturity Date: When the bond issuer must repay the principal to the bondholder
- Compounding Period: How frequently interest is calculated (annually, semi-annually, etc.)
Understanding Different Yield Metrics
Yield to Maturity (YTM)
Yield to Maturity represents the total return anticipated on a bond if held until its maturity date. YTM considers:
- The bond's current market price
- Its face value
- Time until maturity
- Coupon payments
- Compounding frequency
YTM is essentially the internal rate of return (IRR) of the bond. It answers the question: "What's the annualized return I'll receive if I buy this bond today and hold it until maturity?"
Current Yield
Current Yield provides a simpler metric that only considers the bond's annual coupon payments relative to its current market price:
Current Yield = (Annual Coupon Payment / Current Bond Price) × 100%
This metric gives investors a quick way to compare a bond's interest income to other income-generating investments, but it doesn't account for capital gains/losses if the bond was purchased at a discount or premium.
Tax-Equivalent Yield
Tax-Equivalent Yield helps investors compare taxable bonds with tax-exempt bonds (like municipal bonds). It answers: "What yield would a taxable bond need to offer to match the after-tax return of a tax-exempt bond?"
For taxable bonds, the calculation is:
Tax-Equivalent Yield =
Yield to Maturity × (1 - Tax Rate)
Common Investor Strategies Based on Yield Metrics
.svg)
Laddering
Creating a portfolio of bonds with staggered maturity dates to balance yield and interest rate risk
.svg)
Barbell Strategy
Investing in short-term and long-term bonds while avoiding intermediate maturities
.svg)
Bullet Strategy
Concentrating bond investments around a specific target maturity date
Limitations of Yield Calculations
YTM assumes all coupon payments can be reinvested at the same rate
Market conditions and interest rates change over time
Credit risk may affect actual returns if the issuer defaults
Early redemption features (call options) may limit upside potential
