PrefBlog

Performance of the HIMIPref™ Indices for October, 2010, was:

CPD again took a good hit on its tracking error against TXPR, down 15bp on the month and 43bp on the quarter. The advertised MER of 0.48% implies these figures should be 4bp and 12bp in the absence of trading frictions. I’m happy! One man’s market impact cost is another man’s market-making gain, and if Claymore is incurring market impact costs in the neighborhood of 100bp p.a., that’s over $5-million on the table to be divvied up by guys like me.

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at 235bp, a significant decline from the 265bp reported at September month-end. Long corporate yields declined to 5.2% from 5.3% during the period while PerpetualDiscounts had a larger decline in dividend terms, from 5.69% to 5.41%, which became from 7.97% to 7.57% in interest-equivalent terms at the standard conversion factor of 1.4x. I would be happier with long corporates in the 6.00-6.25% range with a seniority spread in the range of 100-150bp, but what do I know? The market has never shown any particular interest in my happiness.

Long Corporates reached a plateau in October:

Charts related to the Seniority Spread and the Bozo Spread (PerpetualDiscount Current Yield less FixedReset Current Yield) are published in PrefLetter.

The trailing year returns are starting to look a bit more normal.

Floaters have had a wild ride; the latest decline is presumably due to the idea that the BoC will be slower rather than faster in hiking the overnight rate. I’m going to keep publishing updates of this graph until the one-year trailing return for the sector no longer looks so gigantic:

Volumes are on their way back up Volume may be under-reported due to the influence of Alternative Trading Systems (as discussed in the November PrefLetter), but I am biding my time before incorporating ATS volumes into the calculations, to see if the effect is transient or not.

Compositions of the passive funds were discussed in the September, 2010, edition of PrefLetter.

Claymore has published NAV and distribution data (problems with the page in IE8 can be kludged by using compatibility view) for its exchange traded fund (CPD) and I have derived the following table:

Claymore currently holds $559,641,405 (advisor & common combined) in CPD assets, up about $24-million from the $486,846,162 reported at August month-end and up about $186-million from the $373,729,364 reported at year-end. Their tracking error does not seem to be affecting their ability to gather assets!

The DPS.UN NAV for September 1 has been published so we may calculate the approximate August returns.

Note that Sentry Select claims September performance of 3.7%, but I believe this is price-based, whereas my calculations are NAV-based. DPS.UN currently trades at a discount of about 4% to its NAV.

Now, to see the DPS.UN quarterly NAV approximate return, we refer to the calculations for August:

Sentry Select is now publishing performance data for DPS.UN, but this appears to be price-based, rather than NAV-based. I will continue to report NAV-based figures.

This entry was posted on Tuesday, November 2nd, 2010 at 8:43 pm and is filed under Index Construction / Reporting. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.