Please help me understand bond fund income discrepancy

[Quantum Sufficit]

Hi folks. I am going to put this out here and see if somebody can give me a decent explanation. Bond fund income of course is dependent on many factors including rising or declining interest rates, duration, yield curve steepness, defaults etc. I am looking at 2 vanguard funds and have dug into the prospectus on both and am looking to pick the brains of you smart financial gurus.

Below is each funds and their stats with total income in dividends for the last 5 or 6 years.

Vanguard High yield tax exempt (VWALX):

Yield to Maturity 3.6%, Average coupon 4.7%, Duration 7.2years. Although it is called a High yield fund, very few issues are actually in the junk categories (below BB) about 16% of all the bonds in portfolio. Here is the income dividend #s -->

2013- 0.436 per share
2014- 0.438 per share
2015- 0.423 per share
2016- 0.425 per share
2017- 0.437 per share
2018- 0.430 per share


Now, compare this to its "higher quality cousin", the Vanguard Long term tax exempt fund (vwlux):

Duration 7.1 years, YTM 3.2%, avg. Coupon 4.7%

Here are the income #s for VWLUX since 2013-->

2013- 0.450 per share
2014- 0.459 per share
2015- 0.439 per share
2016- 0.430 per share
2017- 0.415 per share
2018- 0.401 per share


Here is my question, what would account for the effectively declining income stream in VWLUX but not apparently to the same extent in its "high yield" cousin VWALX when credit quality is not all that different except for about 16% of the bonds in the vwalx portfolio and similar durations? One would assume the longer duration "protected" the income from precipitous decline during the 10 year 0 interest rate period but that should have occurred for both funds. Any other ideas? Thanks all!

 

[COcheesehead]

Portfolios are dynamic. Its hard to say what was in each at the beginning versus now. My guess is you are seeing an example of reinvestment risk. Just because you could buy bonds that yielded X at one time, does not mean that you will get that same yield again in the future. So the higher quality fund may be having a harder time recently finding comparable yields whereas the lower quality fund could be buying all kinds of NJ and IL bonds with rising yields.

 

[Quantum Sufficit]

Thank you that makes sense. Ugh... If I could only find a 5 percent cd again