Understanding SEC 30-Day Yield: Definition, Formula, and Examples

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The SEC 30-day yield is a standardized measure of a fund’s income: the net investment income it earned over the most recent 30-day period, after expenses, expressed as an annual rate. The U.S. Securities and Exchange Commission prescribes the formula, so a bond mutual fund and a bond ETF that both report an SEC yield have calculated it the same way. That shared method makes it a fair basis for comparing the income two funds are generating right now. It is not a forecast of what an investor will earn.

How the SEC Yield Works

Before the standard existed, funds could advertise yield in whatever way flattered them. One fund might count only coupon payments, while another might divide its latest payout by a stale price. The SEC rule fixes the inputs and the math.

Funds typically calculate the 30-day SEC yield as of the last day of each month and publish it in fact sheets and on fund websites. For bond holdings, interest income is not simply the coupons collected. It is computed from each bond’s yield to maturity based on its market value. In practice, this amortizes premiums and discounts. A bond bought above par with a high coupon contributes less income to the SEC yield than its coupon suggests, because part of that coupon is effectively a return of the premium paid.

The result answers a narrow question: if the fund kept earning net income at the rate of the past 30 days for a full year, with semiannual compounding, what would that income be as a percentage of the share price?

How to Calculate the SEC Yield

The formula is:

SEC yield = 2 × [((a − b) / (c × d) + 1)^6 − 1]

The Four Variables

• a = dividends and interest earned during the 30-day period
• b = expenses accrued during the period, net of any reimbursements
• c = average daily number of shares outstanding that were entitled to receive distributions
• d = maximum offering price per share on the last day of the period

The term (a − b) / (c × d) is net income per share for one month, divided by the share price, which gives a monthly yield. Adding 1 and raising it to the sixth power compounds that rate over six months. Subtracting 1 and doubling converts the result to an annual rate on a semiannual basis, the same convention used for bond yields.

The “maximum offering price” matters for funds with a front-end sales charge. Because it includes the maximum load, a larger price sits in the denominator, and the reported yield comes out lower than it would on net asset value (NAV) alone.

SEC Yield Calculation Example

Take a hypothetical bond fund with the following figures for the 30-day period:

• Interest earned: $40,000, plus dividends of $2,000, so a = $42,000
• Expenses accrued: $9,000, of which $1,000 was reimbursed by the adviser, so b = $8,000
• Average shares entitled to distributions: c = 1,000,000
• Maximum offering price on the last day: d = $25.00

The calculation runs in five steps:

1. Net income: $42,000 − $8,000 = $34,000
2. Divide by (1,000,000 × $25) = $25,000,000, which gives 0.00136
3. Add 1 and raise to the sixth power: 1.00136^6 ≈ 1.008188
4. Subtract 1: 0.008188
5. Multiply by 2: ≈ 0.01638, or about 1.64%

Without the reimbursement, b would be $9,000 and the yield would fall to roughly 1.59%. Many funds publish both versions. The subsidized yield reflects fee waivers currently in place. The unsubsidized yield shows what the fund would earn if those waivers ended, which can happen when a waiver agreement expires.

How Investors Use It

The SEC yield is most useful when comparing funds that hold similar assets, such as two intermediate-term Treasury funds or two corporate bond ETFs. A gap in SEC yield points to a real difference in what the portfolios earn net of costs.

It is also a check on headline payouts. A fund whose distribution yield sits well above its SEC yield may be paying out more than its portfolio currently earns on a yield-to-maturity basis. The gap often comes from holding premium bonds or from passing through other sources of cash.

SEC Yield vs. Other Yield Measures

• Distribution yield: the most recent distribution, annualized and divided by price or NAV. It shows what was paid, not what was earned, and it can include items the SEC method excludes.
• 12-month (trailing) yield: the past year’s distributions divided by the current price. It looks backward over a longer window, so it adjusts slowly when interest rates move. The 30-day figure reacts sooner.
• Yield to maturity: a per-bond or portfolio measure of return if bonds are held to maturity. The SEC yield builds on it but nets out fund expenses.
• APY: the annual percentage yield quoted on bank deposits, which reflects compounding on an account balance. An SEC yield is not a guaranteed rate and carries no deposit insurance.
• Seven-day yield: the money market fund equivalent, based on a shorter period because these funds hold very short-term instruments.

Limitations

The SEC yield is a 30-day snapshot. If rates change or the manager turns over holdings, next month’s figure will differ. It ignores capital gains and losses, so a fund can show a positive SEC yield while its share price falls and its total return turns negative. It is also a pre-tax figure. Investors comparing municipal bond funds with taxable funds need to convert it to a tax-equivalent yield. For stock funds, the figure captures only dividend income net of expenses, which is a small part of what those funds are expected to deliver.

The Bottom Line

Investors choosing between bond funds that hold similar assets can use the SEC yield as a fair measure of the income each portfolio currently earns after costs. It also helps flag funds whose distribution yield runs well above what the portfolio earns. Because it ignores capital gains and losses, changes monthly, and is a pre-tax figure, the SEC yield is a snapshot of current income and does not forecast total return.