30-day yield
Encyclopedia
In the United States
, 30-day yield is a standardized yield
calculation for bond fund
s. The formula for calculating 30-day yield is specified by the U.S. Securities and Exchange Commission (SEC). The formula translates the bond fund's current portfolio
income into a standardized yield for reporting and comparison purposes. A bond fund's 30-day yield may appear in the fund's "Statement of Additional Information (SAI)" in its prospectus
.
Because the 30-day yield is a standardized mandatory calculation for all United States bond funds, it serves as a common ground comparison of yield performance. Its weakness lies in the fact that funds tend to trade
actively and do not hold bonds until maturity. In addition, funds do not mature. For this reason, analysts often consider a distribution yield to be a better measure of a fund's income-generating potential.
United States money market
funds report a 7 Day SEC Yield
. The rate expresses how much the fund would yield if it paid income at the same level as it did in the prior 7 days for a whole year. It is calculated by taking the sum of the income paid out over the period divided by 7, and multiplying that quantity by 36500 (365 days x 100).
for the bond portfolio. Because bond funds trade actively and prices fluctuate, the rate may not be a good indicator of future results. However, because the calculation is standardized, it provides a good comparison measure for funds.
The formula for SEC 30-day yield is
Yield = 2[{(a-b)/cd+1}^6-1]
Where:
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, 30-day yield is a standardized yield
Yield (finance)
In finance, the term yield describes the amount in cash that returns to the owners of a security. Normally it does not include the price variations, at the difference of the total return...
calculation for bond fund
Bond fund
A bond fund is a collective investment scheme that invests in bonds and other debt securities. Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than...
s. The formula for calculating 30-day yield is specified by the U.S. Securities and Exchange Commission (SEC). The formula translates the bond fund's current portfolio
Portfolio (finance)
Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.-Definition:The term portfolio refers to any collection of financial assets such as stocks, bonds and cash...
income into a standardized yield for reporting and comparison purposes. A bond fund's 30-day yield may appear in the fund's "Statement of Additional Information (SAI)" in its prospectus
Prospectus (finance)
In finance, a prospectus is a document that describes a financial security for potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements,...
.
Because the 30-day yield is a standardized mandatory calculation for all United States bond funds, it serves as a common ground comparison of yield performance. Its weakness lies in the fact that funds tend to trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
actively and do not hold bonds until maturity. In addition, funds do not mature. For this reason, analysts often consider a distribution yield to be a better measure of a fund's income-generating potential.
United States money market
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
funds report a 7 Day SEC Yield
7 Day SEC Yield
The 7-day SEC yield is a measure of performance in the interest rates of money market mutual funds offered by US mutual fund companies.The calculation is performed as follows:This does not take compounding into effect.-Examples:...
. The rate expresses how much the fund would yield if it paid income at the same level as it did in the prior 7 days for a whole year. It is calculated by taking the sum of the income paid out over the period divided by 7, and multiplying that quantity by 36500 (365 days x 100).
Bond fund yield calculation
The SEC yield calculation for a bond fund is essentially a yield to maturityYield to maturity
The Yield to maturity or redemption yield of a bond or other fixed-interest security, such as gilts, is the internal rate of return earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity, and that all coupon and principal payments...
for the bond portfolio. Because bond funds trade actively and prices fluctuate, the rate may not be a good indicator of future results. However, because the calculation is standardized, it provides a good comparison measure for funds.
The formula for SEC 30-day yield is
Yield = 2[{(a-b)/cd+1}^6-1]
Where:
- a = dividends and interestInterestInterest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
- b = accrued expenses
- 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