Bond fund with specific maturity dates
Posted: Tue Sep 11, 2018 9:42 pm
I know this has been covered in other posts, but I am still unclear.
I am looking at laddering bond funds with specific maturity dates, but I do not understand how YTM can change when the fund is meant to be held the end of maturity.
For example, BSCK, which has a 2020 maturity, lists:
30 day sec yield: 3.11%
Distribution yield: 2.21%
Avg coupon: 3.34%
Yield to worst: 3.14%
Yield to maturity: 3.14%
12 month distro rate: 1.97%
There are so many numbers here, it makes my head spin. My understanding is that, unless someone calls bonds - and thus, they have to be replaced - the fund holds a specific number of bonds through the 2020 maturity date, at which point the fund liquidates. In the prospectus it says you can expect distributions to be lower in the final year as the bonds come to maturity and are held in cash.
Can someone clarify the following:
1) If I'm holding to maturity, and the Avg coupon is 3.34%, should I be expecting a 3.34% return minus the .10 management fee?
2) What does YTM matter when the Avg coupon is 3.34%? And why is YTM lower than Avg coupon? If I'm holding to maturity, why would the YTM be different from Avg coupon?
3) Why is the 12 month distro rate 1.97%? That's well below year to maturity? I'm unclear.
I am looking at laddering bond funds with specific maturity dates, but I do not understand how YTM can change when the fund is meant to be held the end of maturity.
For example, BSCK, which has a 2020 maturity, lists:
30 day sec yield: 3.11%
Distribution yield: 2.21%
Avg coupon: 3.34%
Yield to worst: 3.14%
Yield to maturity: 3.14%
12 month distro rate: 1.97%
There are so many numbers here, it makes my head spin. My understanding is that, unless someone calls bonds - and thus, they have to be replaced - the fund holds a specific number of bonds through the 2020 maturity date, at which point the fund liquidates. In the prospectus it says you can expect distributions to be lower in the final year as the bonds come to maturity and are held in cash.
Can someone clarify the following:
1) If I'm holding to maturity, and the Avg coupon is 3.34%, should I be expecting a 3.34% return minus the .10 management fee?
2) What does YTM matter when the Avg coupon is 3.34%? And why is YTM lower than Avg coupon? If I'm holding to maturity, why would the YTM be different from Avg coupon?
3) Why is the 12 month distro rate 1.97%? That's well below year to maturity? I'm unclear.