Difference Between SEC 30 Day Yield and Distribution Yield TTM

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 Joined: Wed Oct 03, 2018 8:11 pm
Difference Between SEC 30 Day Yield and Distribution Yield TTM
Forgive my ignorance. How do I interpret the difference between a 30day yield and Distribution Yield TTM? I am trying to understand the annual interest payment/APY. Ex. SPDR Bloomberg Barclays Intermediate Term Treasury ETF (ITE) shows 30day SEC yield of 2.94% and Distribution Yield TTM of 1.88%. How can I compare those numbers to say, a CD APY rate of 3.10%?
 Phineas J. Whoopee
 Posts: 7706
 Joined: Sun Dec 18, 2011 6:18 pm
Re: Difference Between SEC 30 Day Yield and Distribution Yield TTM
Distribution yield is about the past. SEC yield is forward looking.
SEC yield and APY on a CD don't measure exactly the same thing, but to stick to the question you asked those would be the numbers to compare.
PJW
SEC yield and APY on a CD don't measure exactly the same thing, but to stick to the question you asked those would be the numbers to compare.
PJW
Re: Difference Between SEC 30 Day Yield and Distribution Yield TTM
The SEC yield is the estimate of future returns, so it is the number you want to use.
Suppose that a mutual fund bought a bond for $1000 with a $20 annual coupon. One year before maturity, the bond is worth $990. If it holds the bond to maturity, it will have $1020 in one year, which is a 3.03% return; this is the SEC yield. However, the bond paid a coupon of only $20, which is a 2.02% distribution yield.
If the fund sells the bond now (for a $10 capital loss), it might buy a new bond for $990 with a $30 coupon payment. You won't be any better off as an investor, but you will now have a fund with a 3.03% SEC yield and a 3.03% distribution yield.
Suppose that a mutual fund bought a bond for $1000 with a $20 annual coupon. One year before maturity, the bond is worth $990. If it holds the bond to maturity, it will have $1020 in one year, which is a 3.03% return; this is the SEC yield. However, the bond paid a coupon of only $20, which is a 2.02% distribution yield.
If the fund sells the bond now (for a $10 capital loss), it might buy a new bond for $990 with a $30 coupon payment. You won't be any better off as an investor, but you will now have a fund with a 3.03% SEC yield and a 3.03% distribution yield.