Average Redemption Yield on selected Italian Government securities and bonds

Average redemption yield on selected Italian bonds and Government securities (daily elaboration)

Information on yields can be obtained from the Research Department. Daily monthly yields from October 1986 are available for downloading. A complete set of figures from 1986 onwards are also available in the 2001 edition of R&S-Mediobanca CD-ROM.

Redemption yield on each issue is computed as the internal rate of return which makes the present value of the future income stream in the form of principal, interest and bonuses equal to the market price of the issue.

For purposes of computing redemption yield, the market quotation is adjusted to the tel quel price by adding interest accrued between the last interest payment date and the reference date, based on the nominal rate carried by the current interest coupon. In accordance with stock market practice, accrued interest since 4 January 1999 has been based on actual days elapsed (the "Act/Act" basis). It was previously calculated on the basis of a 12-month 360-day business year. The tel quel price is thus the price payable by purchasers. The value date of the purchase is based on the reference date.

Interest as yet undetermined on index-linked securities is calculated on the basis of the most recent reference parameters. Specifically, interest maturing during the remaining life of an issue is determined as follows:

Fully determined coupon: where all the parameters are known, calculations are based on them (this is the case with the current interest coupon, and sometimes that immediately following it);

Partially determined coupon: where only some of the parameters are known, calculations are based on them. These are progressively adjusted in order to approach as closely as possible the fully determined coupon (this is often the case with the interest coupon immediately following the current coupon). The calculation is up-dated every time revised reference parameters come to hand;

Expected coupon: where none of the parameters is known, calculations are based on their most recent values (this is the case with most coupons following the current coupon). The calculation is up-dated every time revised parameters come to hand. When Ordinary Treasury Bill yields are used, the figures are based only on end-month auctions which are considered to be more significant than those held in mid-month.

A similar procedure is applied for indexing redemptions of principal.

The sample from which average yield is calculated consists of bonds having a life to redemption in excess of two years and an annual trading volume of more than one billion lire (516,457 EUR). For purposes of including new issues, volume is calculated every three months. Bonds are eliminated from the sample when their life to redemption falls below two years and their trading volume is no longer significant.

The sample also excludes (i) bonds with redemption schedules in which uncertainties are such as to preclude calculating yield, e.g., some open-ended issues, (ii) convertible bonds, for so long as they are convertible, (iii) bonds with unexercised warrants and (iv) bonds denominated in currencies other than Eur.

F.A.Q. - Frequently Asked Questions

What is the purpose of this indicator?

It aims to calculate the average redemption yield on listed bonds with a view to measuring a rate of interest while also providing a useful indicator for both investors and issuers.

When were yields first calculated?

The first series of statistics was published in October 1986.

Are historical series available?

These may be requested from Mediobanca's Research Department, together with a booklet setting out the methods used.

Are there any series of statistics calculated after tax?

Figures net of tax were calculated up to 30 June 1998. Following a change in the tax treatment of investment income, which now varies according to the type of investor, net yields have not been calculated since 1 July 1998.




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