Glossary

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Yankee Bond
A bond denominated in U.S. dollars and issued in the United States by foreign governments, banks and corporations. This type of bond is known as a foreign bond.

Yield
The rate of return on an investment expressed as a percentage. Also see dividend yield and SEC yield.

Yield Curve
A graph or "curve" that depicts the yields of bonds of varying maturities, from short-term to long-term. The graph shows the relationship between short- and long-term interest rates. Long-term rates are typically higher than short-term rates. When short-term rates are higher than long-term rates, this is called an "inverted" yield curve.

Yield Spread
The variation between yields on different types of debt securities; generally a function of supply and demand, differences in maturities, or credit quality. Treasury bonds, for example, because they are perceived to be safe, will normally yield less than corporate bonds of the same maturity. Corporate bonds, then, are said to trade at a "spread" above Treasury rates.

Yield To Call
The yield on a bond assuming it is called by the issuer at the next available call date.

Yield To Maturity
Represents the rate of return anticipated on a bond if held until its maturity. The YTM calculation takes into account the bond’s current market price, par value, coupon interest rate and time to maturity under the assumptions that all cash flows received are reinvested at the same rate as the bond’s current yield.

Yield To Worst
Represents the lowest potential yield that an investor would receive on a bond if the issuer does not default. The yield to worst is calculated by making worst-case scenario assumptions on the issue by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer. The YTW is used to evaluate the worst-case scenario for yield to help investors manage their risk and exposures.