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United Kingdom
United Kingdom
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Redemption yield meaning
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What does Redemption yield mean?
The redemption yield is the annualised rate of return an investor is expected to earn on a bond if it is held to its redemption (maturity) date, combining all coupon income with any capital gain or loss between the purchase price and the redemption amount. It is essentially the bond’s internal rate of return based on the price paid, coupon schedule, redemption value and timing.
In UK and Irish practice this is a market/practice term (often called yield to maturity) rather than one defined by legislation or case law, although prospectuses, trust deeds and make-whole provisions may define it for the purposes of a particular transaction. Calculations assume timely payments, no default and (by convention) reinvestment of coupons at the same rate. It is commonly quoted on a gross basis (gross redemption yield), with net/yield-after-tax used where tax is relevant. For callable or putable bonds, practitioners also consider yield to call or yield to worst. The concept is used across England & Wales, Scotland, Northern Ireland and Ireland on a consistent basis, including in bond issuance, due diligence, disclosure drafting, valuation, pricing of gilts, and in covenant and early redemption mechanics. It differs from current yield, which looks only at coupon income...
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View the related Practice Notes about Redemption yield
PRACTICE NOTES
UK Banking, Finance, Capital Markets, Derivatives and Insolvency Law Glossary including Islamic finance
Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...
22 May
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