What does redemption yield mean?
Redemption yield (also known as ‘yield to maturity’) is approximately the current yield plus the capital gain (negative for loss) per year until redemption.
Securities with a maturity date which are trading at a discount to their issue price will have a redemption yield which is higher than the straight yield due to the effect of the gain between the market price and the redemption price.
A similar yield is ‘yield to call’ which is the yield including the capital gain (or loss if negative) assuming that the issuer calls (or redeems) the security on the first call date. In the current market it is not wise to assume that issuers will call securities and so the gross redemption yield may never materialise.