Bond Yield to Worst (BYTW)

The term Yield to Worst is often abbreviated as YTW. It is calculated the same way as yield to maturity. The difference is that it uses the years until callable rather than the years until maturity, which shortens the time the bond is potentially held.

Yield to worst (YTW) is the lowest possible yield an investor can expect when investing in a callable bond.This figure is known as the yield to worst.

YTW is primarily a risk if the bond is purchased at a premium to par value. Formula to calculate yield to worst has two broad components :

YTW = Risk Free Rate + Credit Risk Premium

Note: YTW calculation is very crucial for investors since it gives them a balanced idea of what to expect in the future.