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Given that I have a portfolio of High yield bond with USD 50.

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Return is duration times change in spread. You have daily data so if the change in yield between two days is 20 basis points and the duration is 5 then the daily return is 100 basis points. One thing to be careful is duration changes over time particularly for the HY index which ranges from 4 - 6 years if I recall correctly.

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  • $\begingroup$ Can I say that the yield for 10y HY bond is 3.05+2.705 on 31/1/2018, and I sum up for other dates as well then only calculate the monthly change in spread ? $\endgroup$ – WantToLearnNewSkills Apr 20 at 5:31
  • $\begingroup$ or just use 3.05, 3.31, 3.27,... and find change in spread? which one is actually the yield for the 10y HY bond? I am not sure about the definition of CSI BARC index. $\endgroup$ – WantToLearnNewSkills Apr 20 at 5:46
  • $\begingroup$ I think you're confusing things. The CSI BARC Index tracks the yield of High Yield corporate bonds. The second index is the generic yield for 10Y Treasury Yields. You cannot add them together. You're trying to calculate the total return of the CSI BARC. The yield is NOT your return. What you need to use is a total return index. In this case, LF98TRUU Index is the total return index for HY from Bloomberg Barclays. $\endgroup$ – VanillaCall Apr 20 at 12:20
  • $\begingroup$ Hi, thank you for the reply. Now I use BARC index, which tracks the yield to calculate monthly change in spread , and then multiply with the duration=5, I got the return for the bond. $\endgroup$ – WantToLearnNewSkills Apr 20 at 13:12
  • $\begingroup$ That's one way to do it but not an accurate method because you also have the coupon return which isn't captured. Unless you're just calculating return due to price changes only. $\endgroup$ – VanillaCall Apr 20 at 14:32

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