Bond Yield question

[Lonestar]

The SEC yield for a bond fund is calculated by annualizing its daily income distributions for the previous 7 days but quoted as a 30 day yield. However, there is something I am missing.

If I take last month's dollar dividend payment in my VGIT account and multiply it by 12, then divide by the current value of the account, it seems I should get the current annualized yield. My calculation shows a yield of 1.45%, however the published 30 day SEC yield shows it at 0.28%.

What's wrong with my calculation?

[mathjak107]

not correct if you are talking bond funds and not money markets .

money markets are the last 7 days ...

bond funds and etfs are the last 30 days ending on the last day of the last month.

this is why you can't compare yields on t-bill etf's to money markets

[Lonestar]

My mistake, not what intended to type. I'm not trying to compare to MM, just trying to figure out why my calculation for annual return is so much more than the published data.

[mathjak107]

My mistake, not what intended to type. I'm not trying to compare to MM, just trying to figure out why my calculation for annual return is so much more than the published data.

the 30 day period is based on the last 30 days ending in the previous month . if you calculated it in july its based on june ... if you did it in august it is based on july

[Lonestar]

I understand that, but it's difficult to believe the yield dropped 127 bp in one month on an etf of this duration.

[mathjak107]

which etf?

edit :

noticed you mentioned it

[mathjak107]

perhaps this is part of the answer ....

sec yield

Based on a 30-day period ending on the last day of the previous month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. The figure listed lags by one month. When a dash appears, the yield available is more than 30 days old.

it says the figure listed lags by 1 month .

[Lonestar]

I don't think the 30 day period (whenever it is calculated) is the issue here. There has been extremely little difference in the 30 day SEC yield in the last several months, so consequently this does not come into play with my question.

Regardless of the period, I'm seeing greater than 100bp difference between my actual calculated monthly dividend and what they are reporting as 30 day SEC yield. This as been evident since the first of the year. Am I missing something?

The reason I'm asking all this is I don;t feel there is a lot of capital appreciation left in IT bonds. Only if they go negative. I'm considering going into 1 year CD's at a annual rate of 1%. But, if I'm really getting about 1% actual annual return in VGIT then why bother.

[Tortoise]

Maybe try calculating the SEC yield for a few other funds to see if you notice similar discrepancies or if it’s specific to VGIT?

[Lonestar]

OK, did what I should have done first, and called Vanguard fixed income desk. Apparently the 30 day SEC yield is a somewhat complicated thing but is calculated the same for all fixed income ETF's, regardless of which company you are looking at. That way it is a apples to apples comparison when evaluating.

Also, the 30 day yield DOES NOT reflect the actual annualized yield. My calculations using current monthly dividend payment is correct, even though when "annualized" it can change every day. I just feel bad for someone looking for a fixed income fund, and thinking the yield is so low. The actual yield is still very disappointing anyway.