Trying to get a good friend into a Boglehead-style portfolio, and doing some research on his current holdings-
The fund in question: Thornburg CA Limited-Term Muni A (LTCAX)
Ignoring the fact that its 94 bps/year, the SEC yield is a still just a measly .64%. If you look at the portfolio holdings, however, it says that 76% of its bond holdings are in the 4-6% coupon range. Granted, cash is 20% of the fund, but that's clearly not enough to pull the yield down to .64%
Any ideas on whats going on? I've never seen an instance where Morningstar is miles off. If all the info is correct however, this fund is as bad as it gets.
Muni Bond fund with baffling duration/yield
Muni Bond fund with baffling duration/yield
There are times when, at least for now, one must be content to love the questions themselves - Neil deGrasse Tyson
Re: Muni Bond fund with baffling duration/yield
I see a yield of around 1.7% according to Yahoo. More importantly, why would you be in a loaded fund?
http://finance.yahoo.com/q/pr?s=LTCAX+Profile
http://finance.yahoo.com/q/pr?s=LTCAX+Profile
Re: Muni Bond fund with baffling duration/yield
Tyr0ne: coupon and yield can be very different. Most likely, those are older bonds close to maturity.
For example, today you can buy an old Treasury maturing in Feb 2015 with a coupon of 11.25%. The catch? You have to pay almost $110 per $100, resulting in a yield of 0.14% on your money for the remainder of the term. Unsurprisingly, this is about the same as you'd get from a fresh 1 year Treasury.
The fund is a loser because of the very high fees (more than half of what it's making), not because of the discrepancy.
For example, today you can buy an old Treasury maturing in Feb 2015 with a coupon of 11.25%. The catch? You have to pay almost $110 per $100, resulting in a yield of 0.14% on your money for the remainder of the term. Unsurprisingly, this is about the same as you'd get from a fresh 1 year Treasury.
The fund is a loser because of the very high fees (more than half of what it's making), not because of the discrepancy.
Re: Muni Bond fund with baffling duration/yield
I never thought about time to maturity. This makes sense. Although, M* states it has an average maturity of 4.26 and an average duration of 3.37. The duration doesn't quite match up with the yield, at least intuitively.ogd wrote:Tyr0ne: coupon and yield can be very different. Most likely, those are older bonds close to maturity.
According to M*, 1.7% is the trailing twelve month yield, and the 30-day SEC yield is .64%.Greatness wrote:I see a yield of around 1.7% according to Yahoo. More importantly, why would you be in a loaded fund?
http://finance.yahoo.com/q/pr?s=LTCAX+Profile
There are times when, at least for now, one must be content to love the questions themselves - Neil deGrasse Tyson
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Re: Muni Bond fund with baffling duration/yield
Replace that fund with the low cost and very diversified Vanguard Intermediate Term Tax Exempt Bond Fund.
Stay the course!
Stay the course!
John C. Bogle: “Simplicity is the master key to financial success."
Re: Muni Bond fund with baffling duration/yield
Vanguard's most comparable fund, Limited-Term Tax-Exempt, has a duration of 2.4 years and a yield of 0.88% before expenses. The Thornburg fund has a yield of 1.6% before expenses, which makes sense since it has a longer duration and slightly riskier bonds (more BBBs)Tyr0ne wrote:I never thought about time to maturity. This makes sense. Although, M* states it has an average maturity of 4.26 and an average duration of 3.37. The duration doesn't quite match up with the yield, at least intuitively.ogd wrote:Tyr0ne: coupon and yield can be very different. Most likely, those are older bonds close to maturity.