Yield to Worst (YTW)
The minimum of yield to maturity and yield to call — the lowest yield a bondholder might realize given the issuer's call options. The standard "worst-case" yield quoted for callable bonds.
When to use: Use as the conservative yield benchmark for any callable bond. Bond screens and broker platforms display YTW prominently because it captures the realistic floor under the bondholder's return.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| YTW | Yield to Worst | The minimum of YTM and YTC — the lower-bound yield to a callable bondholder | % |
| YTM | Yield to Maturity | IRR of the bond if held to maturity, expressed as a nominal annual rate compounded m times per year | % |
| YTC | Yield to Call | IRR of the bond assuming it is called on the first call date at the call price | % |
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
Compute YTC for each call date and include them all in the minimum. Standard practice: YTW = min(YTM, YTC₁, YTC₂, …).
No — it's an upper bound on what the issuer can force the bondholder to accept. Realized yield depends on actual call decisions, which depend on rates at each call date.
For puttable bonds the analog is yield to best — the maximum across YTM and YTP (yield to put) — because the holder, not the issuer, controls the option. Most fixed-income tooling defaults to YTW for callables and explicit yield-to-put for puttables.