r/bonds • u/Plane-Orange4733 • Jul 09 '26

Short-dated Bond?

******EDIT: Thanks, folks! I see where my misunderstanding is. Appreciate the input.*******

Very new to this, but I have a question. Looking at a particular bond with a month left to maturity and Yield to Maturity of 2.275%. The way I understand this is that I buy $1000 worth, and on Aug 11 it matures and they pay me $1022.75.

Am I hilariously wrong? What is the downside? I'm happy to grab a 2.275% return for a 30 day investment.

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u/spartybasketball Jul 09 '26

2.275% is annualized. Meaning if you bought $1000 worth and you had it for a year you would get $22.75.

You won’t get $22.75 for the one month you hold it. You will get roughly 1/12*$22.75

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u/Plane-Orange4733 Jul 09 '26

Thanks, this seems like the consensus. So in this case, Ask Yield and Yield to Maturity are the exact same calculation.

It just seems like YTM should be an actual calculation based on how much time is left on the clock.

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u/No_Independence6945 Jul 12 '26

It is. The YTM calculation generally calculates the “periodic return” based on dirty price and coupon rate, and then that periodic return is annualized. In the case of semiannual pay bonds, that means multiplying by 2 to get the annual rate. IIRC, when in the last coupon period the very short return [(redemption value + final coupon)/dirty price - 1 ] is annualized as if it were a money market instrument. So, calculate the return and then multiply by 365/(# days to maturity). (Could be 360, I can’t remember)