The 7-day yield is a standardized metric used to express the annualized return from a money market fund based on the fund's performance over the past seven days.
The 7-day yield is a commonly used performance indicator for money market mutual funds and short-term investment products. It reflects the hypothetical annualized return an investor would receive if the fund’s performance during the past seven days continued for a full year. Calculated using net interest income (excluding capital gains) earned over the previous seven days, it is then annualized by multiplying by 365/7. This standardized measurement enables investors to compare various money market funds on equal footing. Unlike more volatile return metrics, the 7-day yield is typically stable and reflects the interest rate environment for short-term, highly liquid investments. As such, it is frequently reported by fund managers, brokerages, and financial advisors as part of fund fact sheets and performance dashboards. It is important to note that the 7-day yield is backward-looking and does not predict future returns. However, it’s a reliable indicator for gauging the current interest environment affecting cash-equivalent investments.
The 7-day yield plays an essential role in evaluating the performance of short-term cash allocations, which are a key component in liquidity management and capital preservation strategies. Family offices often use money market funds for operational liquidity or as a holding bay for capital awaiting deployment. Having a standardized yield metric allows for transparent benchmarking across funds, enhancing decision-making in treasury operations or investment committee oversight. It also assists in aligning fund selection with risk tolerance, duration needs, and interest rate outlooks.
Suppose a money market fund earned $0.015 per share over the last 7 days on a NAV of $1.00. The 7-day yield is calculated as: (0.015 / 1.00) × (365 / 7) = 0.782 or 7.82%. An investor can assume that, if this yield were constant, they would earn approximately 7.82% annualized returns — though future yields are not guaranteed.
7-Day Yield vs. 30-Day Yield
While both yields reflect annualized performance, the 7-day yield uses a shorter, weekly window and is more reflective of immediate interest rate conditions. The 30-day yield, on the other hand, offers a smoother, more averaged view over a one-month period — helpful for assessing medium-term trends. Investors with short-term liquidity needs may prefer 7-day yield data, while those evaluating more stable or longer-term trends could benefit from the 30-day yield.
Is the 7-day yield a guaranteed annual return?
No, it’s not guaranteed. The 7-day yield is a backward-looking, annualized metric assuming the performance over the last week persists for a full year, which may not happen.
How does the 7-day yield differ from actual fund returns?
The 7-day yield represents hypothetical annualized income and doesn’t account for market fluctuations or compounding over time, whereas actual returns include all distributions and NAV changes over a period.
Can I use 7-day yield to compare money market funds?
Yes, it provides a consistent, standardized return metric that allows investors to compare the income-generating potential of different money market funds under current rates.
