HIMIPref™ Index Performance: December 2010

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

Total Return
Index Performance
December 2010
Three Months
December 30, 2010
Ratchet +2.00% *** +7.46% ***
FixFloat -0.35% ** +7.19% **
Floater +2.00% +7.46%
OpRet +0.68% +1.10%
SplitShare -0.84% +3.65%
Interest +0.68%**** +1.10%****
PerpetualPremium +0.50% +1.25%
PerpetualDiscount -0.47% +2.55%
FixedReset +0.03% +0.49%
** The last member of the FixedFloater index was transferred to Scraps at the June, 2010, rebalancing; subsequent performance figures are set equal to the Floater index. The index was repopulated at the October, 2010, rebalancing
*** The last member of the RatchetRate index was transferred to Scraps at the July, 2010, rebalancing; subsequent performance figures are set equal to the Floater index
**** The last member of the InterestBearing index was transferred to Scraps at the June, 2009, rebalancing; subsequent performance figures are set equal to the OperatingRetractible index
Passive Funds (see below for calculations)
CPD -0.01% +1.44%
DPS.UN +0.14% +1.19%
BMO-CM 50 -0.04% +2.64%
TXPR Total Return 0.00% +1.86%

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the year at 225bp, a slight increase from the 220bp reported at November month end. Long corporate yields remained constant 5.4% during the period (albeit with interesting things happening in the interim) while PerpetualDiscounts increased slightly to 5.48% from 5.41% dividend yield. 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 wild ride of long corporates during the month is illustrated by the BMO Long Corporate Bond Index ETF tracking error chart:

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. The droop at year end is quite pronounced.

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:

CPD Return, 1- & 3-month, to December 30, 2010
Date NAV Distribution Return for Sub-Period Monthly Return
September 30 17.07      
October 26 17.21 0.069 +1.22% +1.40%
October 29, 2010 17.24   +0.17%
November 25 17.25 0.069 +0.46% +0.23%
November 30 17.21   -0.23%
December 24 17.09 0.069 -0.30% -0.01%
December 31 17.14   +0.29%
Quarterly Return +1.44%

Claymore currently holds $596,621,272 (advisor & common combined) in CPD assets, up about $14-million (2.47%) from the $582,195,003 reported at November month-end and up about $223-million (+59.64%) from the $373,729,364 reported at year-end 2009. Their tracking error does not seem to be affecting their ability to gather assets!

The DPS.UN NAV for December 29 has been published so we may calculate the approximate December returns.

DPS.UN NAV Return, December-ish 2010
Date NAV Distribution Return for sub-period Return for period
December 1 21.33      
December 29 21.01 0.30   -0.09%
Estimated December Beginning Stub *
Estimated December Ending Stub +0.29% *****
Estimated December Return +0.14% ******
**CPD had a NAVPU of 17.21 on November 30 and 17.20 on December 1, therefore the return for the day was -0.06%. The return for DPS.UN in this period is presumed to be equal.
*****CPD had a NAVPU of 17.09 on December 29 and 17.14 on December 31, hence the total return for the period for CPD was +0.29%. The return for DPS.UN in this period is presumed to be equal.
**** The estimated December return for DPS.UN’s NAV is therefore the product of three period returns, -0.06%, -0.09%, +0.29% to arrive at an estimate for the calendar month of +0.14%

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

DPS.UN NAV Returns, three-month-ish to end-December-ish, 2010
October-ish +0.17%
November-ish +0.88%
December-ish +0.14%
Three-months-ish +1.19%

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.

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