Yield To Call

Yield to Call is also called as YTC, is the earnings an investor would receive on a bond, if it is held until the first date upon which the issue can demand redemption. If you purchase a bond that is callable and the company calls it, you do not have the option of holding it to maturity. Therefore the yield to maturity will not be earned. If the present interest rates are quite below the outstanding bond or security’s coupon rate, it is a callable bond is possible to be called; and investors will estimate its most likely rate of return as the yield to call rather than yield to maturity.

Benefits of Yield to Call are as follows:

Yield to Call helps the users to anticipate what yields to expect given their redemption assumptions for a bond. It provides insight into the range of possible yield scenarios, so that the users can better gauge the value of the securities they are buying, selling and analyzing.

Helps Sales People

Yield to Call allows the salespeople to become the “go-to-person” for their buy-side clients. It helps them to fully inform their customers of the range of yields they could expect based on their interest rate assumptions.

Yield to Call Helps Portfolio Managers

Yield to Call helps the portfolio managers to anticipate the possible yields on a bond based on their redemption assumptions in order to make fully informed buy and sell decisions that will help them to meet their portfolio’s objectives.

Yield to Call Helps Traders

Yield to Call helps traders to view all the redemption scenarios of a bond in one place in order to make sure they are pricing the bond to worst call.

Questionnaire:

• What is Yield to Call?
• What are the advantages of Yield to Call?