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SEC yield vs distribution yield

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  • SEC yield vs distribution yield

    Could someone please explain to me the difference between the two? Let’s say you put $1M into vwitx (Vanguard intermediate Muni Fund) in your taxable account, what will your annual dividends be? The 30 day SEC yield is 1.99% whereas the distribution yield is 2.73%. Thanks!

  • #2
    https://www.thebalance.com/distribution-yield-vs-sec-yield-which-should-you-use-416978

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    • #3
      Thanks ENTdoc. So you’re saying my dividend will be somewhere between 1.99% and 2.73%? That’s somewhere between $19,900 and $27,300 a year? I read your link. It’s confusing to say the least. Wish we could get just  one number.

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      • #4
        It's impossible to say with certainty what your interest payments will be. This is because whatever fund you purchase is repurchasing new bonds with possibly different yields from the past. They also might be selling old bonds, so lots of moving parts. If I used one number I'd use SEC yield multiplied by the amount you invested, realizing that the actual number may be a bit different.

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        • #5
          Thanks!

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          • #6
            stupid Muni-bond question here:

            I invested 50k in VWITX with a reported "SEC yield" of 2.08%, yet I've lost $1,622 in that fund as of today.

            Now I understand that bond prices and yields are inverse, but just doesn't make sense to me that I'm losing money while interest rates are rising...

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            • #7
              Remember the seesaw (or teeter totter) at the playground? Bond prices and interest rates are like a teeter totter: when interest rates go up, prices on already issued bonds go down. When interest rates drop, prices on existing bonds go up.

              https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/

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              • #8




                stupid Muni-bond question here:

                I invested 50k in VWITX with a reported “SEC yield” of 2.08%, yet I’ve lost $1,622 in that fund as of today.

                Now I understand that bond prices and yields are inverse, but just doesn’t make sense to me that I’m losing money while interest rates are rising…
                Click to expand...


                Let's say you are holding bonds with a yield of 2.08%, but market interest rates rise to 2.25%.  This makes the bonds you are holding less valuable which will push the prices down and the yield up.  The flip side is true as well.  If rates drop to 1.75%, this make your 2.08% bonds more valuable and pushes the price up and the yield down.

                 

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                • #9




                  stupid Muni-bond question here:

                  I invested 50k in VWITX with a reported “SEC yield” of 2.08%, yet I’ve lost $1,622 in that fund as of today.

                  Now I understand that bond prices and yields are inverse, but just doesn’t make sense to me that I’m losing money while interest rates are rising…
                  Click to expand...


                  That loss is a capital loss. If you made $1622 and sold the fund you would have a capital gain.  Bond funds can make you money with the interest plus the capital gain.  You can lose if the bond price goes down with a rate increase.  Bond funds continually replace bonds with different yields.

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