PrefBlog

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

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) closed the year at 220bp, a slight tightening from the 225bp at November month-end.

The relative returns on Floaters over the past year continues to impress:

But one must remember how they got there:

FixedReset volume ticked up mid-month with the burst of issuance, but has resumed its downward trend. 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. The average volume of FixedResets continues to decline, which may be due to a number of factors:

• The calculation is an exponential moving average with dampening applied to spikes. While this procedure has worked very well in the past (it is used to estimate the maximum size of potential trades when performing simulations) there are no guarantees that it works well this particular time
• Other than the January burst, there hasn’t been much issuance of investment-grade FixedResets recently, which will decrease the liquidity of the whole group, both for technical and real reasons
• The issues are becoming seasoned, as the shares gradually find their way into the accounts of buy-and-hold investors

And the yield-to-worst on FixedResets seems to have found a bottom:

As discussed last month, the impressive returns of the past year cannot continue indefinately. The long term return on a fixed income instrument is its yield – 5.8% for a PerpetualDiscount, and about 3.6% to the call date for a FixedReset.

Compositions of the passive funds were discussed in the September 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:

It is of interest to note that the January total return for CPD’s benchmark, TXPR, was -0.29% and the trailing three-month return was +4.03%; tracking error is therefore -0.24% and -0.37%, of which about 0.04% and 0.11%, respectively, is MER. Their efforts at rebalancing cost unitholders a lot of money! The MER may be only 45bp, but the first 2010 semiannual rebalancing alone cost about 20bp.

Claymore currently holds $397,666,518 (advisor & common combined) in CPD assets, up about $26-million from the $373,729,364 reported last month.

The DPS.UN NAV for December 30 has been published so we may calculate the approximate December returns.

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

This entry was posted on Tuesday, February 2nd, 2010 at 4:02 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.