Help me understand the yield and pricing relationship in CMBS bonds
I am trying to figure out how to calculate the yield for each class of bonds of a CMBS transaction. For each class I have the size, coupon, dollar price, yield, avg. life, and spread over swaps. (All this info was provided in last weeks CMA). I put this into an excel file and can provide a link if you want. (If you can show how each category is calculated in excel that would be perfect).
[{"id": "d0c175m", "text": "Don't be upset if this is more simplistic than you had hoped.  You asked the relationship between price and yield in bonds - it's inverse.  Price goes up, yield goes down.  Yield is derived by dividing returns over price.  If you were looking for something more specific, clarify and I'll try to assist.", "replies": [{"id": "d0cb2aa", "text": "Okay, so a CMBS deal priced last week and the A-4 bond had the following info:\nAmount: $325.154MM\nCoupon: 3.544%\nDollar Price: $102.994\nYield: 3.193%\nAvg. Life: 9.81 years\nSpread (over swaps): 165 bp\n\nI thought yield = coupon/price, but using the above coupon and price does not equal the given yield. The above values were taken from CMA, so they aren't incorrect.", "replies": [{"id": "d0ccip8", "text": "The coupon is what is the actual return relative to the portfolio value (trading @ $100).  It's trading at $102, so the yield will be lower because the price is higher.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d0c33x4", "text": "most of what you're looking for is explained in the prospectus. The yield is the coupon on the bond, and the average life is calculated based on the attributes of the pool. The dollar price and spread are related - the spread is reflective of active market bids (what people will pay for the bonds) and the price is interpreted based on the spread. ", "replies": [], "depth": 1}]