annualized percentage return on a bond or note redeemed by the issuer at the earliest possible call date. When a security can be called by the issuer at the first call date allowed by the bond indenture, the annualized yield to that date is often substituted for the yield to maturity in yield quotations. Although some longer-term U.S. Treasury bonds are callable five years prior to final maturity, as indicated by the hyphenated quote in bond tables, in practice few, if any, Treasury securities have been called prior to maturity. The term yield to first call is used when a bond issue is trading at a premium over the call price and the investor would lose capital. The yield to first call, taking this loss into account, usually is lower than the yield to final call.
Yield to par is used to describe the yield on securities that are issued at a discount or premium in relation their nominal value, or par value and are callable at par. Also known as yield to first call.
yield on a bond assuming the bond will be redeemed by the issuer at the first call date specified in the indenture agreement.
yield on a bond assuming the bond will be redeemed by the issuer at the first call date specified in the indenture agreement. The same calculations are used to calculate yield to call as Yield To Maturity except that the principal value at maturity is replaced by the first call price and the maturity date is replaced by the first call date. Assuming the issuer will put the interest of the company before the interest of the investor and will call the bonds if it is favorable to do so, the lower of the yield to call and the yield to maturity can be viewed as the more realistic rate of return to the investor.
