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PIMCO Total Return Instl Message Board

  • touchpointdan touchpointdan Sep 21, 2012 9:01 AM Flag

    Deciding between this and TGLMX/DBLTX

    Trying to decide regarding my bond allocation between these three funds. TGLMX/DBLTX is much heavier into mortgage-backed securities which got my attention with QE3 buying $40b/month of these securities. I am seeing a yield of 6.3% on TGLMX and wondering how they are getting such a high yield on MBS's. Are they returning capital and 'faking' a high-yield?

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    • Don't believe it is possible to distribute or report capital gains as a "yield". Dividend distributions should be the yield along with any ex-distributions. A gain in value on the face/principal of a MBS is a capital gain short or long term and should not be reflected or included as an annual yield. This is why we have cap gain distributions at year's end when the books can settle out and any losses offsetting gains on trades in and out of the underlying portfolio can be reported and or distributed. You may be looking at last year's figures for TGLMX in which case a commingling of both the dividends and cap gains were lumped together as a measure of the year's perfromance?

      • 1 Reply to postmortem2u
      • Hope the following sheds some further light on your question. Cited directly from the glossary section in the Yahoo Personal Finance tab:

        Yield is the rate of return on an investment expressed as a percent. Yield is usually calculated by dividing the amount you receive annually in dividends or interest by the amount you spent to buy the investment.In the case of stocks, yield is the dividend you receive per share divided by the stock's price per share. With bonds, it is the interest divided by the price you paid. Current yield, in contrast, is the interest or dividends divided by the current market price.In the case of bonds, the yield on your investment and the interest rate your investment pays are sometimes, but by no means always, the same. If the price you pay for a bond is higher or lower than par, the yield will be different from the interest rate. For example, if you pay $950 for a bond with a par value of $1,000 that pays 6% interest, or $60 a year, your yield is 6.3% ($60 ÷ $950 = 0.0631). But if you paid $1,100 for the same bond, your yield would be only 5.5% ($60 ÷ $1,100 = 0.0545).

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