The Investinginbonds.com web site allows you to see a history of trades for specific bonds. Here is two lines of a typical report, reformatted to make it readable here:
Time of Trade: 10/02/2008 16:31:17 Price Paid: $94.480 Yield: 19.742% Size: $4K
Time of Trade: 10/02/2008 16:30:55 Price Paid: $85.572 Yield: 45.404% Size: $50K
What I don't understand in the above is how are they calculating the Yield? It cannot be that the same bond that gives the same coupon payment would have the yields they are reporting given the sale prices.
To see this, consider the first trade at $94.480 with yield of 19.742. That implies a coupon payment of $18.65 (if it were a once per annum payment with a 19.742% yield per annum).
For the second trade, if it were purchased at $85.572 and had the same $18.65 coupon payment, then the effective yield should be reported as
21.795% and not 45.404%.Clearly I am not reading this correctly. Can someone familiar with how they calculate Yield here explain it to me?