PrefBlog

Note that CL.PR.B has been called for redemption.

There were the following intra-month changes:

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

CPD still has a problem with tracking error – based on its management fee, the monthly tracking error is expected to be 4bp, but this month they came in at 7bp (which was nevertheless an improvement from recent values). The difference may not seem like much, but when these figures are annualized …

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at 220bp, a significant decline from the 235bp reported at October month end. Long corporate yields increased to 5.4% from 5.2% during the period while PerpetualDiscounts remained constant at 5.41% dividend yield, equivalent to 7.57% interest 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.

The increase in Long Corporate yields was most pronounced in the first part of the month:

Click for Big

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.

Click for big

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:

Click for big

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.

Click for big

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 $582,195,003 (advisor & common combined) in CPD assets, up about $23-million (4.03%) from the $559,641,405 reported at August month-end and up about $208-million (55.78%) 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 December 1 has been published so we may calculate the approximate November returns.

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

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.

There were the following intra-month changes:

As briefly noted yesterday, the FixedReset Index set a new all-time low yield record as of the close November 3 with a mark of 2.88%.

Click for Big

This is all the more impressive since changes to the index in October added three lower-quality, higher-yielding issues to the index, which had an effect on the determination of the median yield.

To celebrate, I am publishing the constituents of the FixedReset index, sorted in various ways:

• Yield
• Volume
• Ticker

Given that the DEX Short-Term Corporate Index yields about 2.5% and the ZCS short term corporate ETF yields 2.4% before fees, a yield of 2.88% is not entirely unreasonable: the interest-equivalent is 4.03%, giving a pre-tax spread of about 150bp to cover things like the additional credit risk and extension risk of the FixedResets. But I’m not entirely convinced that the market actually thinks that way.

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:

Click for Big

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.

Click for big

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:

Click for big

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.

Click for big

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.

It’s very nice to see that there is now an issue in the FixFloat index! It became empty as of the June, 2010, rebalancing.

There were the following intra-month changes:

It’s nice to see the continued meaningful migration into the PerpetualPremium index! The sole counter-flow issue, GWL.PR.O, has been called for redemption. The PWF.PR.A move reverses the adjustment for this issue performed in August.

There were the following intra-month changes:

It seems like only yesterday that I was excited that the FixedReset Index YTW had hit an all-time low of 3.26% … but no, that happened on August 19. It only took another month to hop over the next milestone, as the median weighted average Yield-to-Worst of the FixedReset index is now firmly below 3.00%.

Click for Big

To celebrate, I am publishing the FixedReset index constituent list, sorted three ways:

• By yield
• By ticker
• By volume

Short corporates now yield about 2.7%, so one can certainly make a case for the idea that a yield below 3.0% for FixedResets is fair and reasonable – that allows 150bp for extension and credit risk on a pre-tax interest-equivalent basis – but I don’t think the market thinks like that and I think the market will receive a rude shock when the issuers start calling these things.

I was interviewed today by a reporter for a major Canadian newspaper and talked about what I liked for 15 minutes … then told her ‘wait a minute, you have to put something about FixedResets in this article or you’ll get about 100 eMails following publication, because a lot of people love these things.’ Not to worry – apparently the other experts she interviewed for the piece strongly recommended FixedResets. Hopefully, I’ll get a look at the article later this week.

How about that PWF.PR.P, eh? It’s a 4.40%+160 FixedReset issued in June …. now trading at 26.23-34, but given a 5-Year GOC yield of 2.11%, it’s not expected to be called 2016-1-31.

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

There was another month of significant tracking error for CPD, as it implemented the July 2010 TXPR Rebalancing.

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at 265bp, a significant decline from the 275bp recorded at July month-end. Long corporate yields declined to 5.3% from 5.5% during the period while PerpetualDiscounts had the same decline in dividend terms, from 5.89% to 5.69%, which became a larger move in interest-equivalent terms, from 8.25% to 7.97%. I would be happier with long corporates in the 6.00-6.25% range, but what do I know? The market has never shown any particular interest in my happiness.

Long Corporates have simply been on wheels:

Click for Big

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.

Click for big

But I suggest that eventually yields will make a difference:

Click for big

FixedResets set an all time low in median weighted average yield-to-worst during the month … this is going to end in tears.

And look, I know the index yield for Floaters shows discontinuities – it’s a result of index rebalancings due to volume shifting the mid point back and forth between the two BAM issues and either one of the PWF or the TRI issues. Give me better data and I’ll give you a better graph!

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:

Click for big

FixedReset volume declined during the month after their burst of activity in April when they performed poorly. 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.

Click for big

Compositions of the passive funds were discussed in the September, 2009, 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 $486,846,162 (advisor & common combined) in CPD assets, up about $24-million from the $462,433,680 reported last month and up about $113-million from the $373,729,364 reported at year-end. The monthly increase in AUM of about 5% is larger than the total return of +0.72%, implying that the ETF experienced significant net subscriptions in August.

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

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

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.

It’s nice to see a meaningful migration into the PerpetualPremium index!

There were the following intra-month changes: