Break-Even Yield

Break-Even Yield

The yield necessary to cover costs and prevent a firm from operating at a loss. The breakeven yield may be relatively stable or it may fluctuate, depending on the company or industry. Companies with high breakeven yields tend to have large fluctuations in earnings from year to year. Calculating the breakeven yield is an important part of risk analysis.
References in periodicals archive ?
Since the break-even yield is earned only on that part of the portfolio which does not default (1 - [D.
Assuming an expected default rate in 1991 of 10% and a 30% recovery rate (both reasonable assumptions) and a coupon rate of 12% on high-yield bonds, the break-even yield would have been 17.