PrefBlog

The HIMIPref™ FixedReset Index set a new record low median-YTW record today, as this value dropped to a niggardly 3.26%, a new low.

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To celebrate, I am publishing the constituents of this index, with three sorts:

• by YTW
• by average daily trading volume
• by ticker symbol

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

Unofficial data for TXPR indicates a total return of +1.70% for July, indicating a rather large tracking error of 55bp for CPD on the month, probably due to the semi-annual July rebalancing. No accounting had been made in the original post for the change to monthly distributions. This error has now been corrected. The tracking error for July is therefore 13bp – still rather large, but much smaller than the estimate that did not account for the distribution.

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at 275bp, a significant decline from the 290bp recorded at June month-end. Long corporate yields increased slightly, to 5.5% from 5.45%. 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.

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.

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But I suggest that eventually yields will make a difference:

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Floaters have had a wild ride

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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.

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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 $462,433,680 (advisor & common combined) in CPD assets, up about $18-million from the $444,847,391 reported last month and up about $88-million from the $373,729,364 reported at year-end. The monthly increase in AUM of about 3.95% is larger than the total return of +1.15%, implying that the ETF experienced net subscriptions in July.

The DPS.UN NAV for July 28 has been published so we may calculate the approximate July returns.

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

The strong performance of Straight Perpetuals over the past two months means that the PerpetualPremium index has been repopulated, albeit lightly and weakly. Unfortunately, however, low volumes on BAM.PR.E have resulted in its relegation to the Scraps index, leaving Ratchets as an empty set.

There were the following intra-month changes:

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

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at 290bp a significant decline from the +315bp recorded on May 31. The big story was the decline in long corporate yields, from 5.65% to 5.45%, as increased chatter about deflation has the market timers all excited.

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.

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.

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Floaters have had a wild ride

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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.

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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 $444,847,391 (advisor & common combined) in CPD assets, up about $13-million from the $431,929,434 reported last month and up about $71-million from the $373,729,364 reported at year-end. The monthly increase in AUM of about 2.99% is larger than the total return of +2.58%, implying that the ETF experienced small net subscriptions in May.

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

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

The strong performance of Straight Perpetuals over the past month means that the PerpetualPremium index has been repopulated, albeit lightly and weakly. Unfortunately, however, low volumes on BAM.PR.G have resulted in its relegation to the Scraps index, leaving FixedFloaters as an empty set.

There were the following intra-month changes:

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

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at +315bp, a slight (an possibly spurious) decline from the +320bp recorded on April 30.

The trailing year returns are starting to look a bit more normal, as the Floater index has now lost the value of the incredible +33.18% return recorded in May 2009 and replaced it with this month’s total return of -6.61%.

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Floaters have had a wild ride, with May 2010 being their worst month since June 2009:

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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.

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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 $431,929,434 (advisor & common combined) in CPD assets, up about $3-million from the $428,556,482 reported last month and up about $58-million from the $373,729,364 reported at year-end. The monthly increase in AUM of about 0.77% is smaller than the total return of +0.93%, implying that the ETF experienced a small net redemption in May.

The DPS.UN NAV for May 26 has been published so we may calculate the approximate May returns.

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

The PerpetualPremium index has finally become an empty set with the volume-based move to Scraps index of GWL.PR.O, a chimerical issue which can sometimes be a straight, sometimes a FixedFloater, depending on where Prime is.

There were the following intra-month changes:

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

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at +320bp, a sharp increase from +285bp at March month-end and +235bp recorded at February month-end. The decline in the PerpetualDiscount index was entirely due to an increase in the spread over corporates, since yields on long corporates actually declined from 5.8% to 5.7% in April.

The relative returns on Floaters over the past year continues to impress, although returns moderated in April. Given the prices and yields, I suspect that we have now entered an era of normalcy for Floaters:

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The relatively low duration of FixedResets means that the relatively restrained total return loss during the month masked a violent increase in yield:

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Floaters have had a wild ride:

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FixedReset volume picked up during the month. 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.

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Who knows? Maybed we’ll get even more FixedReset volume in May, once investors receive their brokerage statements and learn that prices can also go down!

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:

Claymore currently holds $428,556,482 (advisor & common combined) in CPD assets, down about $7-million from the $435,437,774 reported last month and up about $62-million from the $373,729,364 reported at year-end. The monthly decline in AUM of about 1.58% is smaller than the total return loss of 2.13%, implying that the ETF continues to attract assets.

The DPS.UN NAV for April 28 has been published so we may calculate the approximate March returns. On March 29, it went ex-Dividend for $0.30 according to the TMX.

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

As a result of the migration from PerpetualPremium to PerpetualDiscount due to price declines, the PerpetualPremium index has only one remaining member: GWL.PR.O, a chimerical issue which can sometimes be a straight, sometimes a FixedFloater, depending on where Prime is.

There were the following intra-month changes:

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

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at +285bp, a sharp increase from the +235bp recorded at February month-end. The decline in the PerpetualDiscount index was entirely due to an increase in the spread over corporates, since yields on long corporates actually declined from 5.9% to 5.8%.

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The Seniority Spread is now the largest component of PerpetualDiscount Interest-Equivalent yields:

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The seniority spread is at a one-year high:

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And the Seniority Spread is well above long-term levels:

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

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But one must remember how they got there:

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FixedReset volume picked up during the month. 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.

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As discussed in February, the impressive returns of the past year cannot continue indefinately. The long term return on a fixed income instrument is its yield – 6.2% for a PerpetualDiscount, and about 3.6% to the call date for a FixedReset, as of April 1. The FixedReset index set a new low yield in March, highlighted by RY.PR.R’s brief flirtation with sub-3% levels.

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:

Claymore currently holds $435,437,774 (advisor & common combined) in CPD assets, up about $15-million from the $420,750,223 reported last month and up about $62-million from the $373,729,364 reported at year-end.

The DPS.UN NAV for March 31 has been published so we may calculate the approximate March returns. On March 29, it went ex-Dividend for $0.30 according to the TMX.

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