RT Journal Article
SR Electronic
T1 Seeking Improved Yield: How to Make SEC Yield More Suitable for TIPS
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP jfi.2022.1.131
DO 10.3905/jfi.2022.1.131
A1 John D. Finnerty
YR 2022
UL https://pm-research.com/content/early/2022/02/05/jfi.2022.1.131.abstract
AB Inconsistent application of the SEC Yield formula to calculate TIPS bond mutual fund and TIPS bond ETF yields can lead to misleading yield reporting. This article recommends two adjustments to make the SEC Yield calculation more suitable for comparing TIPS bond fund performance. First, apply the break-even inflation rate to re-express each TIPS bond’s real yield as an equivalent nominal yield. Second, use the nominal yield to maturity to calculate 30 days’ interest income, but do not add the monthly inflation adjustment to the TIPS bond’s principal amount.