When you buy a yield to maturity, the total return you can expect from a bond if you hold it until it matures, accounting for price, coupons, and time. Also known as redemption yield, it’s the one number that tells you whether a bond is truly worth buying—not just its coupon rate, but what you’ll actually earn after factoring in what you paid for it. Most people think a 5% coupon means 5% return. But if you bought that bond for less than face value, your real return is higher. If you paid more, your return is lower. Yield to maturity cuts through the noise.
This metric ties directly to bond investing, the practice of buying debt securities to earn steady income, and it’s the backbone of any fixed income strategy. It’s why interest rate risk, how bond prices move inversely with changes in market rates matters so much. When rates rise, bond prices fall—and yield to maturity rises to match. When rates drop, bond prices climb, and yield to maturity drops. If you’re holding bonds in a rising rate environment, like we’ve seen since 2022, yield to maturity is your real north star. It’s not about what the bond paid last year. It’s about what it’ll pay you from today until it matures.
It also explains why bond funds, portfolios of many bonds managed as a single investment behave differently than individual bonds. A bond fund doesn’t have a maturity date—it keeps buying and selling. So its yield to maturity is always changing. That’s why fund yields can swing even when you’re not touching your money. If you’re comparing a bond fund to a single bond, you need to look at yield to maturity, not just the fund’s distribution rate. One tells you what you’ll earn if you hold it. The other just tells you what it paid last month.
You’ll find this concept in posts about floating-rate notes, mortgage REITs, and bond funds because they all live in the same world: the world of income, timing, and price. Whether you’re trying to protect your portfolio from rising rates, deciding between individual bonds and funds, or just trying to understand why your bond investment didn’t perform like you expected, yield to maturity is the missing link. It’s not glamorous. It doesn’t make headlines. But it’s the number that decides whether you’re really earning what you think you are.
Below, you’ll find real-world breakdowns of how yield to maturity affects everything from retirement income to portfolio rebalancing, how it interacts with taxes and fees, and why it’s the quiet hero behind most fixed-income decisions. No theory. No fluff. Just what you need to know to make smarter calls with your money.
