How is rolldown yield defined?

Rolldown yield is defined as the percent change of a bond's price over time, primarily as a result of the bond's price movement along the yield curve as it approaches maturity. This concept is based on the idea that as time progresses, a bond tends to "roll down" the yield curve to a lower yield, thereby increasing its price if the yield curve is upward sloping.

For example, if a bond has a yield that is marketably higher than the current yield of a comparable bond further down the curve, as the bond approaches its maturity date, its yield will decrease, pushing the price up, which results in a capital gain. This yield benefit can provide investors with a sense of the expected returns from holding the bond over a specific period, regardless of the final yield at maturity.

The other options do not accurately capture the essence of rolldown yield. While net returns, total returns, and annualized yields are all relevant financial metrics, they do not focus specifically on the price movement of the bond along the yield curve over time, which is central to the definition of rolldown yield.