Yield to Call (YTC)

Yield to Call (YTC) is the total annualised return an investor can expect to earn on a callable bond if the bond is redeemed by the issuer on the earliest possible call date, rather than held to final maturity. Callable bonds give the issuer the right — but not the obligation — to redeem the bond before maturity, typically when market interest rates fall below the bond's coupon rate, making it advantageous for the issuer to refinance at lower rates. YTC is calculated using the same methodology as Yield to Maturity (YTM) but substitutes the call date and call price (which may be above par) in place of the maturity date and face value. For investors in Indian callable bonds — including certain AT1 bonds issued by banks and callable NCDs — comparing YTC with YTM reveals the extent of call risk. If the YTC is significantly lower than the YTM, the investor faces meaningful reinvestment risk if the bond is called during a low-interest-rate environment.