What is the 'Yield To Worst  YTW'
The yield to worst (YTW) is the lowest potential yield that can be received on a bond without the issuer actually defaulting. The YTW is calculated by making worstcase scenario assumptions on the issue by calculating the return that would be received if the issuer uses provisions, including prepayments, calls or sinking funds. This metric is used to evaluate the worstcase scenario for yield to help investors manage risks and ensure that specific income requirements will still be met even in the worst scenarios.
BREAKING DOWN 'Yield To Worst  YTW'
A bond's YTW is calculated on all possible call dates. It is assumed that a prepayment occurs if the bond has call option and the issuer can offer a lower coupon rate based on current market rates. The YTW is the lowest of yield to maturity or yield to call (if the bond has prepayment provisions); YTW may be the same as yield to maturity, but it can never be higher. It is the holder's lowest rate of return.
The Mechanics
The yield to call is the annual rate of return assuming the bond is redeemed by the issuer on the next call date. A bond is callable if the issuer has the right to redeem it prior to the maturity date. YTW is the lower of the yield to call or yield to maturity. A put provision gives the holder the right to sell the bond back to the company at a certain price at a specified date. There is a yield to put, but this doesn't factor into the YTW since it is the investor's option on whether to sell the bond.
Determining Which Yield is Right
If a bond is not callable, the yield to maturity is the appropriate yield for investors to use, since there isn't a yield to call. However, if a bond is callable, it becomes important to look at the YTW. In particular, for a bond is trading above par value, the yield to maturity may be higher than the yield to call, since the investor pays a premium that takes away from the return. In this case, the YTW is important to examine since the bond could be called and this is the lowest yield possible, assuming there is not a default.
If a bond is trading below par, the discount adds to an investor's return. Therefore, the yield to maturity is lower than the yield to call, even if the security can be redeemed. The yield to maturity is the YTW.
Both yield to maturity and yield to call are estimates of return. The yield to call and yield to maturity both assume the coupons are reinvested at the lower rate, but interest rates change. It also assumes the bond is held until the call date or maturity.

Yield
Yield is the return a company gives back to investors for investing ... 
Running Yield
Running yield is the annual income on an investment divided by ... 
Bond Yield
Bond yield is the amount of return an investor will realize on ... 
Yield Pickup
Yield pickup is the additional interest rate an investor receives ... 
Breakeven Yield
The breakeven yield is the yield required to cover the cost of ... 
Negative Bond Yield
A negative bond yield is an unusual situation in which issuers ...

Investing
How To Evaluate Bond Performance
Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk. 
Investing
How Bond Yields Could Topple the Stock Market
Bond yields have reached a crucial point since the election that could be bad news for the stock market. 
Investing
Find The Right Bond At The Right Time
Find out which bonds you should be investing in and when you should be buying them. 
Investing
Corporate bonds: an Introduction to credit risk
Corporate bonds offer higher yields, but it's important to evaluate the extra risk — including credit risk— involved before you buy. 
Investing
Advanced Bond Concepts
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration. 
Investing
Bond yield curve holds predictive powers
This measure can shed light on future economic activity, inflation levels and interest rates. 
Investing
Climb The Bond Ladder To Higher Income
Whether it's learning how to ladder bonds or finding alternatives, investors seeking better returns need to be more active.

What is the difference between yield to maturity and the yield to call?
Determining various the various yields that callable bonds can provide investors is an important factor in the bond purchasing ... Read Answer >> 
How do I calculate yield to maturity of a zerocoupon bond?
Find out how to calculate the yield to maturity of a zerocoupon bond, and learn why this calculation is simpler than one ... Read Answer >> 
Current yield vs yield to maturity
Learn about the relationship between a bond's current yield and its yield to maturity, including how the market price of ... Read Answer >> 
What risk factors should investors consider before purchasing a callable bond?
Understand the difference between callable and noncallable bonds and consider all the various risk factors associated with ... Read Answer >>