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Perpetual knowledge bank series: running yield

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There are various methods for arriving at a bond's yield and each way of assessing expected earnings, whether expected or realised, has a role in highlighting aspects of potential risk and return. Running yield measures a bond's return or yield each year as a percentage of the bond’s current market value or price. This gives investors a good idea of what they can expect for a return in the current market. 

Typically, a running yield is determined on an annual basis, but may be calculated more frequently if desired. Running yield is also sometimes referred to as current return, current yield, or yield to maturity (YTM) when used in reference to bonds. While we have previous discussed the coupon rate of a bond, which represents the nominal yield (calculated by dividing the annual coupon payments by the face value of the debt instrument), the running yield uses the current market price of the bond instead of the face value as its denominator. Therefore, this yield measures the return that an investor can expect if they hold the bond for a full year. However, as with any type of formula, a running yield only provides valuable data if the information used for the calculation is up to date. 



This analysis has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.

The information is believed to be accurate at the time of compilation and is provided in good faith. This document may contain information contributed by third parties. PIML and PSL do not warrant the accuracy or completeness of any information contributed by a third party. Any views expressed in this document are opinions of the author at the time of writing and do not constitute a recommendation to act. 

The product disclosure statement(PDS) for the Perpetual Diversified Income Fund issued by PIML, should be considered before deciding whether to acquire or hold units in the fund. The PDS and Target Market Determination can be obtained by calling 1800 022 033 or visiting our website http://www.perpetual.com.au

No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Past performance is not indicative of future performance.