What is YTM (Yield to Maturity)? │ Bondster


What is YTM (Yield to Maturity)?

What is YTM (Yield to Maturity)?

December 11, 2023

The YTM indicator shows the expected annual percentage return on a loan investment if it is held until the last payment is due. You will see this indicator on the platform BONDSTER for loans offered on the secondary market where it is used to protect investors from investing in non-performing loans.

The yield to maturity indicator includes possible surcharges or discounts and is based on the assumption that future loan instalments will be paid in line with the repayment schedule. If the loan is in arrears, it is assumed that the instalment will be paid the next day.

If you choose to offer loans for sale on the secondary market, setting a surcharge that is too high may lead to a negative YTM. Such loans then cannot be placed on the secondary market. In that case, the surcharge will have to be reduced so that the YTM equals at least zero.

If the YTM falls into negative territory after the loan is placed on the secondary market (interest is paid over time which makes the YTM decline and at some point, it may fall below the surcharge amount of the loan that is offered), the loan will be removed from the secondary market. When this happens, you will be informed about the loan removal by e-mail.

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