Bond fund yield calculation
30-day yield, Wikipedia
The formula for SEC 30-day yield is
- a = dividends and interest collected during the past 30 days
- b = accrued expenses of the past 30 days
- c = average daily number of outstanding shares that were entitled to distributions
- d = the maximum public offering price per share on the last day of the period
--Blbarnitz 22:40, 3 July 2020 (UTC)
Including the formula in this form might be useful, but it needs clarification. In particular, this formula from Wikipedia does not explain that the income for a bond is based on yield to maturity (or to call); if a bond rises in price, the value of a will be less than the coupon payment. I was hoping to find a more official SEC page giving the full SEC definitions.
--Grabiner 02:52, 4 July 2020 (UTC)
Here is a cached version of the formula with SEC guidance: Form of Amended and Restated Yield Calculation Services Agreement--Blbarnitz 04:21, 4 July 2020 (UTC)
- I used the original (uncached) version and extracted Schedule A below. Yield to maturity is addressed, but not defined. The SEC has a simple definition here: What Are Corporate Bonds?, but Fidelity goes a little deeper and has examples: Bond prices, rates, and yields.
- The main article can use the section below as a reference. --LadyGeek 01:05, 5 July 2020 (UTC)
30 day SEC yield calculations
The calculation methods below are copied from
"Form of Amended and Restated Yield Calculation Services Agreement". Securities and Exchange Commission. Schedule A. Securities and Exchange Commission. August, 2006. Retrieved July 4, 2020. Check date values in:
--LadyGeek 23:42, 4 July 2020 (UTC)
- a = Dividend and interest income for the period
- b = Expenses accrued for the period (net of expense reimbursement)
- c = Average daily number of shares outstanding during the period that were entitled to receive dividends
- d = Maximum offering price per share on the last day of the period
- 30 Day SEC Yield = as calculated above
- r = Current tax rate
To calculate interest earned on debt obligations for purposes of “a” above:
(a) Calculate the yield to maturity of each obligation held by the Fund based on the market value of the obligation (including actual accrued interest) at the close of business on the last business day of each month or, with respect to obligations purchased during the month, the purchase price (plus actual accrued interest). The maturity of an obligation with a call provision(s) is the next call date on which the obligation reasonably may be expected to be called, or if none, the maturity date.
(b) Divide the yield to maturity by 360 and multiply the quotient by the market value of the obligation (including actual accrued interest) to determine the interest income on the obligation for each day of the subsequent month that the obligation is in the portfolio. Assume that each month has 30 days. Yield will be calculated based upon a rolling 30-day average.
(c) Total the interest earned on all debt obligations and all dividends accrued on all equity securities during the 30-day (or one month) period. Although the period for calculating interest earned is based on calendar months, a 30-day yield may be calculated by aggregating the daily interest on the portfolio from portions of 2 months. In addition, a Fund may recalculate daily interest income on the portfolio more than once a month. Yield will be calculated based upon a rolling 30-day average.
(d) For a tax-exempt obligation issued without original issue discount and having a current market discount, use the coupon rate of interest in lieu of the yield to maturity. For a tax-exempt obligation with original issue discount in which the discount is based on the current market value and exceeds the then-remaining portion of original issue discount (market discount), base the yield to maturity on the imputed rate of the original issue discount calculation. For a tax-exempt obligation with original issue discount, where the discount based on the current market value is less than the then-remaining portion of original issue discount (market premium), base the yield to maturity on the market value.
For discount and premium on mortgage or other receivables-backed obligations that are expected to be subject to monthly payments of principal and interest (“paydowns”): (a) Account for gain or loss attributable to actual monthly paydowns as an increase or decrease to interest income during the period; and (b) The Fund may elect:
- (i) To amortize the discount and premium on the remaining securities, based on the cost of the securities, to the weighted average maturity date, if the information is available, or to the remaining term of the securities, if the weighted average maturity date is not available; or
- (ii) Not to amortize the discount or premium on the remaining securities.
Solely for the purpose of calculating yield, recognize dividend income by accruing 1/360 of the stated dividend rate of the security each day that the security is in the portfolio.
Tax Equivalent Yield Quotation. Based on a 30-day (or one month) period ended on the date of the most recent balance sheet included in the registration statement, calculate the Fund’s tax equivalent yield by dividing that portion of the Fund’s yield that is tax-exempt by 1 minus a stated income tax rate and adding the quotient to that portion, if any, of the Fund’s yield that is not tax-exempt.