Yield to Average Life
Candlefocus EditorWhen a company issues bonds, the bonds have a certain maturity date—the date when the bonds are fully paid back to the investors. YTAL takes into consideration the fact that bonds will typically be called and/or refunded before their maturity date. As a result, a bond’s YTAL will typically be less than its stated maturity yield.
Yield-to-average-life calculation takes into account any calls or redemptions that will be made over the life of the bonds. The formula for calculating YTAL consists of two parts. The first part is the coupon rate and the second part is the average remaining life of the debt issue. The calculations also consider any scheduled payments made by the debtor based on the terms of its bonds.
YTAL is typically used by an organisation such as a bank or exchange-trade fund (ETF) that is involved in bond trading. It is also used by trustees of sinking fund bonds, which are bonds issued to help redeem other bonds. The trustees use the calculation to help them determine if they should buy some of the bonds to be redeemed on the open market.
In conclusion, YTAL is an important calculation in the bond market and is used to determine the overall yield of a bond. Investors can use the yield-to-average-life calculation to estimate their return on investment and to make informed decisions about their investments. It is also used by trustees of sinking fund bonds to determine whether or not bonds should be re-purchased. YTAL is an important tool for those involved in bond trading and investing.