# Yield to Maturity

Source: https://www.yieldcurve.pro/learn/yield-to-maturity

**Yield to maturity** (YTM) is the single discount rate that equates a bond's market price to the present value of all its future cash flows — coupons and principal. It is the most commonly quoted measure of a bond's return and the number reported in Treasury auction results, on trading screens, and in yield curve charts.

YTM is calculated by solving for *y* in:

*Price = C/(1+y) + C/(1+y)² + ... + (C+Face)/(1+y)ⁿ*

where *C* is the coupon payment, *Face* is par value, and *n* is the number of periods to maturity.

YTM assumes two things that rarely hold exactly:

- **The bond is held to maturity** — if sold early, the realized return will differ based on the price at sale
- **Coupons are reinvested at the YTM rate** — in practice, reinvestment rates fluctuate with the market, creating reinvestment risk that is larger for long-maturity, high-coupon bonds

Despite these assumptions, YTM remains the standard because it compresses a bond's cash flow profile into a single comparable number. When the Treasury publishes daily yield curve rates, these are par yields — the YTM of hypothetical bonds priced at par for each maturity.

YTM differs from related yield measures:

- **[Spot rate](https://www.yieldcurve.pro/learn/spot-rate)** (zero-coupon yield): the discount rate for a single cash flow at a specific maturity, free of reinvestment assumptions
- **[Par rate](https://www.yieldcurve.pro/learn/par-rate)**: the coupon rate at which a bond would be priced at par, derived from the spot curve
- **[Forward rate](https://www.yieldcurve.pro/learn/forward-rate)**: the implied yield for a future period, derived from the relationship between spot rates

For zero-coupon bonds (like Treasury STRIPS), YTM and the spot rate are identical because there are no intermediate cash flows to reinvest.