See: Dollar Bond; Eurobond

Yellow Sheets
Daily publication that provides bid and ask prices of corporate bonds traded over the counter (OTC) and firms that are market makers in the particular bond.

See: Asked Price; Corporate Bond; Market Maker; Over The Counter; Pink Sheets

Yield
An investment's return from dividends or interest expressed as a percentage of either cost at purchase or the investment's current price. For example, a security with a current market value of $36 a share paying a dividend of $2.50 annually will give an investor a return of 7% ($2.50/$36.00).

See: Yield Equivalence; Yield To Call; Yield To Maturity

Yield Advantage
When an investor buys a corporation's convertible security instead of its common stock, the yield advantage is the additional amount of return an investor can earn. For example, if XYZ Corporation's convertible security yields 12% and XYZ common share yields 7%, the yield advantage is 5%.

See: Convertible Securities

Yield Curve
Graph depicting the term structure of interest rates. It plots the yields of bonds of the same class (corporates, governments, etc.) and quality with maturities that range from the shortest to the longest term. The yields are plotted on the y-axis, and time to maturity on the x-axis. The curve will show whether short-term interest rates are higher or lower than long-term interest rates.

In general, the yield curve is positive. Investors usually receive a higher yield for the extra risk of tying up their money long term. However, if short-term rates are higher, the curve is considered to be a "negative (or inverted) yield curve". And, if a small variation exists between short-term and long-term rates, the curve is considered to be a "flat yield curve".

To make a sound judgment about the direction of interest rates, fixed income analysts and economists will carefully watch the yield curve.

See: Negative Yield Curve; Positive Yield Curve

Yield Equivalence
The interest rate at which a taxable security and a tax-exempt bond have the same rate of return. To calculate the tax equivalent yield of a tax-exempt bond for investors in different tax brackets, the tax-exempt yield is divided by the reciprocal of the tax bracket (e.g., 100 less 28%). Thus, a person in the 28% tax bracket who wants to know the tax equivalent yield of a 8% tax free municipal bond would divide 8% by 72% to get 11%--the yield a taxable security would have to return to be equivalent, after taxes, to an 8% municipal bond. To convert a taxable yield to a tax-exempt yield, the formula is reversed--the tax-exempt yield is equal to the taxable yield multiplied by the reciprocal of the tax bracket.

See: Equivalent Taxable Yield

Yield To Average Life
Calculation used, where bonds are retired systematically during the life of the issue, as in a sinking fund. To satisfy its sinking fund requirements the issuer will buy its bonds on the open market. If the bonds are trading below par, there is automatic price support for such bonds. Therefore, they are apt to trade on a yield-to-average-life basis. In this scenario, this yield calculation will be used instead of "yield to maturity" or "yield to call".

See: Par; Yield To Call; Yield To Maturity

Yield To Call (YTC)
Rate of return an investor earns from a bond assuming the bond is called (redeemed) by the issuer on the first call date specified in the indenture agreement prior to the bond's maturity date. The formula used to calculate yield to call is the same 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. The lower of the yield to call and the yield to maturity will be used to determine an investor's realistic rate of return.

See: Call Price; Yield To Maturity

Yield To Maturity (YTM)
The compound rate of return that investors will receive for a bond with a maturity greater than one year if they hold the bond to maturity and reinvest all cash flows at the same rate of interest. It also takes into account purchase price, redemption value, coupon yield, and the time between interest payments. The YTM will be greater than the current yield when the bond is selling at a discount and will be less if it is selling at a premium. YTM can be approximated using a bond yield table or can be determined using a programmable calculator equipped for bond calculations.

YTM is used extensively in comparing fixed income investments, making fixed income portfolio decisions, and in financial planning.

See: Yield To Average Life; Yield To Call

YLD (Yield)
An investment's return from dividends or interest expressed as a percentage of either cost at purchase or the investment's current price. For example, a security with a current market value of $36 a share paying a dividend rate of annually is will give an investor said to return 7% ($2.50/$36.00).

See: Yield Equivalence; Yield To Call; Yield To Maturity

Yo-Yo Stock
Stock that has volatile price fluctuations and thus, rises and falls like a yo-yo.

YTC (Yield To Call)
Rate of return an investor earns from a bond assuming the bond is called (redeemed) by the issuer on the first call date specified in the indenture agreement prior to the bond's maturity date. The formula used to calculate yield to call is the same 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. The lower of the yield to call and the yield to maturity will be used to determine an investor's realistic rate of return.

See: Call Price; Yield To Maturity

YTM (Yield To Maturity)
The compound rate of return that investors will receive for a bond with a maturity greater than one year if they hold the bond to maturity and reinvest all cash flows at the same rate of interest. It also takes into account purchase price, redemption value, coupon yield, and the time between interest payments. The YTM will be greater than the current yield when the bond is selling at a discount and will be less if it is selling at a premium. YTM can be approximated using a bond yield table or can be determined using a programmable calculator equipped for bond calculations.

YTM is used extensively in comparing fixed income investments, making fixed income portfolio decisions, and in financial planning.