annualized percentage return on a bond substituting the average life maturity for stated final maturity. This often is used in pricing mortgage-backed securities, for example, Collateralized Mortgage Obligations, where prepayment of the underlying mortgages can influence the investor's return, and bonds with sinking fund provisions allowing the issuer to buy back, or redeem, its own bonds.
yield calculation used, in lieu of Yield To Maturity or yield to call, where bonds are retired systematically during the life of the issue, as in the case of a sinking fund with contractual requirements.
yield calculation used, in lieu of Yield To Maturity or yield to call, where bonds are retired systematically during the life of the issue, as in the case of a sinking fund with contractual requirements. Because the issuer will buy its own bonds on the open market to satisfy its sinking fund requirements if the bonds are trading below PAR, there is to that extent automatic price support for such bonds; they therefore tend to trade on a yield-to-average-life basis.
