redemption yield: meaning, definition, pronunciation and examples
C1Technical/Financial
Quick answer
What does “redemption yield” mean?
The total annual return an investor can expect to receive from a bond if it is held until its redemption date, factoring in both interest payments and any capital gain or loss from the purchase price.
Audio
Pronunciation
Definition
Meaning and Definition
The total annual return an investor can expect to receive from a bond if it is held until its redemption date, factoring in both interest payments and any capital gain or loss from the purchase price.
A key financial metric used in bond analysis that expresses the annualised rate of return, incorporating the bond's interest income and the difference between its current market price and its face value at maturity. It is also known as yield to maturity (YTM).
Dialectal Variation
British vs American Usage
Differences
The term is identical in spelling and meaning. The concept is universally used in global finance. 'Redemption yield' is a common UK term; in the US, 'yield to maturity (YTM)' is more frequently used in equivalent contexts.
Connotations
Identical technical connotations.
Frequency
Higher frequency in UK financial journalism and analysis. In the US, 'yield to maturity' is the dominant term, making 'redemption yield' less common in American financial discourse.
Grammar
How to Use “redemption yield” in a Sentence
The redemption yield [VERB] [ADVERB/ADJECTIVE].The [ADJECTIVE] bond has a redemption yield of [NUMBER]%.Investors are attracted by the [ADJECTIVE] redemption yield.Vocabulary
Collocations
Examples
Examples of “redemption yield” in a Sentence
verb
British English
- The fund manager will redeem the bond at par.
American English
- The issuer plans to redeem the callable bonds early.
adverb
British English
- [No direct adverbial form for 'redemption'; 'redeemably' is obsolete.]
American English
- [No direct adverbial form for 'redemption'; 'redeemably' is obsolete.]
adjective
British English
- The redemption date is clearly stated in the offer document.
American English
- The redemption price was higher than the market price.
Usage
Meaning in Context
Business
Central to bond portfolio management, investment reports, and prospectuses. Used by analysts to compare fixed-income securities.
Academic
Featured in finance, economics, and investment textbooks and papers on fixed-income asset pricing.
Everyday
Rarely used outside of personal investing contexts, e.g., discussing pension or savings bond options.
Technical
A precise calculation in financial modeling, requiring time-value-of-money formulas and assumptions about coupon reinvestment.
Vocabulary
Synonyms of “redemption yield”
Strong
Neutral
Weak
Vocabulary
Antonyms of “redemption yield”
Watch out
Common Mistakes When Using “redemption yield”
- Confusing 'redemption yield' with 'current yield' (which ignores capital gain/loss).
- Using it for equities or non-fixed-income products.
- Assuming it's a guaranteed, risk-free return.
FAQ
Frequently Asked Questions
No. The interest rate (coupon rate) is fixed and based on the bond's face value. Redemption yield is a dynamic, total return measure based on the bond's current market price and its path to maturity.
Yes, though rare. A negative redemption yield implies an investor is guaranteed to receive less money at maturity than they paid, which can happen in extreme market conditions (e.g., high-demand safe-haven bonds trading at a large premium).
It allows for an apples-to-apples comparison between different bonds with varying coupons, prices, and maturities. It is the most comprehensive measure of a bond's potential annual return.
Gross Redemption Yield (GRY) does not account for tax on interest income or capital gains. Net Redemption Yield deducts the investor's expected tax liability, providing a more personalised picture of the after-tax return.
The total annual return an investor can expect to receive from a bond if it is held until its redemption date, factoring in both interest payments and any capital gain or loss from the purchase price.
Redemption yield is usually technical/financial in register.
Redemption yield: in British English it is pronounced /rɪˈdempʃn jiːld/, and in American English it is pronounced /rɪˈdɛmpʃən jild/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “[No common idioms for this specific technical term]”
Learning
Memory Aids
Mnemonic
Think of a vending machine (bond). The redemption yield is the total snack (return) you get by waiting until the machine 'redeems' (pays back) your full money at the end, not just the small bag (coupon) it gives you periodically.
Conceptual Metaphor
A JOURNEY'S TOTAL REWARD. The bond is a journey to a fixed destination (maturity). The redemption yield is the total treasure collected (interest) plus the value of the map itself (capital gain/loss) at journey's end.
Practice
Quiz
What is the primary factor that distinguishes 'redemption yield' from 'current yield'?