SEC yield is the yield that a bond mutual fund must disclose in its advertising and other documents according to Securities and Exchange Commission (SEC) rules.
The rather complex calculation reports the annualized current net market yield, or the actual interest earned per share after fund expenses and any sales charges are subtracted, divided by the cost per share. The formula excludes any capital gains the fund may have realized.
SEC yield creates a level playing field for comparing bond fund investments because the amount you would have received in income distributions from each of the funds over a specific period is figured in the same way. This formula can't accurately predict future yields, though, in part because a bond fund portfolio typically changes all the time.
Money market funds must also report SEC yield, though the formula for that calculation is much simpler. In this case, it's what a fund would yield if it paid at the same rate over a full year what it paid in the previous month.