Yield to Worst (YTW)
Yield to Worst (YTW)
Minimum of yield to maturity and the lowest yield to call across all applicable call dates supplied by the user. It is a contractual yield scenario, not a guaranteed realized-return floor.
When to use: First calculate yield for every relevant call date and redemption amount, then enter the lowest YTC alongside YTM.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| YTW | Yield to Worst | Minimum modeled contractual yield, not a guaranteed realized return | % |
| YTM | Yield to Maturity | IRR of the bond if held to maturity, expressed as a nominal annual rate compounded m times per year | % |
| YTC | Lowest Yield to Call | Lowest yield across all applicable call dates and redemption prices | % |
Real-Life Examples
Example 1: Premium Callable Bond
A premium bond shows YTM = 5.50% (held to 10-year maturity) and YTC = 4.43% (called in 3 years).
Given
Step-by-Step
A bond screen would display 4.43% as the "yield" — the realistic worst case. Investors evaluating the bond should benchmark against alternatives at this rate, not at the more flattering YTM.
Frequently Asked Questions
No. Default, actual call decisions, sale price, fees and coupon reinvestment can change realized return. The minimum describes the modeled contractual maturity/call scenarios.
Enter the lowest yield across all relevant call dates, not automatically the first call date. This two-input calculator does not evaluate the call schedule itself.