Finance · Free tool
Bond YTM Calculator
YTM is the annualised return assuming you hold to maturity and reinvest coupons at YTM. The number broker apps quote when listing G-Sec / corporate bonds.
Bond bought below face → YTM > coupon rate. Bond bought at premium → YTM < coupon rate. YTM equals coupon when price equals face.
How it works
YTM is the discount rate that equates the present value of all future coupon payments plus the redemption face value to today's clean price. There's no closed-form solution — we solve numerically (bisection method) to within 0.001%. Current yield is the simpler ratio of annual coupon to current price; it ignores capital gain/loss to maturity. For Indian context, G-Secs pay semi-annual coupons, SDLs (State Development Loans) carry ~25-40 bps spread over G-Sec, and AAA corporates 50-150 bps.
Worked example
A 7.18% GS 2033 G-Sec at face ₹100, currently trading at ₹98.50, with 8 years to maturity: coupon ₹7.18/year split as ₹3.59 semi-annually. The discounted-cashflow solve gives YTM ≈ 7.43% — buying below par boosts return because you collect the same coupons plus a ₹1.50 gain at redemption. Current yield = 7.18/98.50 = 7.29%, slightly understating the actual return. On RBI Retail Direct, settlement adds accrued interest (dirty price).
When to use this
- Comparing a 7-yr AAA corporate at 8.10% YTM vs a same-tenor G-Sec at 7.40%
- Sizing direct bond purchases on RBI Retail Direct or NSE goBID
- Evaluating debt-fund holdings — check the underlying YTM in the SID
For long-term fixed-income comparisons, see our FD calculator or PPF calculator.
FAQ
Why is YTM different from coupon rate?
Coupon is fixed at issuance. YTM accounts for the price you actually paid. If you bought below face value, YTM > coupon. If above face, YTM < coupon.
Is YTM guaranteed?
Only if (a) you hold to maturity, (b) issuer doesn't default, and (c) you reinvest coupons at the same rate. Realised return is usually slightly lower than computed YTM.
Are tax-free bond YTMs better than they look?
Yes — much better. A 5.5% tax-free bond is equivalent to 7.85% pre-tax in the 30% slab. Tax-free PSU bonds (NHAI, REC, IRFC) are competitive with bank FDs at 7%.