{"id":5785,"date":"2009-03-05T23:22:19","date_gmt":"2009-03-06T03:22:19","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=5785"},"modified":"2009-03-05T23:22:19","modified_gmt":"2009-03-06T03:22:19","slug":"perpetualdiscount-yield-distribution","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=5785","title":{"rendered":"PerpetualDiscount Yield Distribution"},"content":{"rendered":"

Rather an odd thing happened with the HIMIPref™ PerpetualDiscount Indices today … compare the published index data:<\/p>\n

\n\n\n\n\n\n
HIMIPref™ PerpetualDiscount Index
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Date<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
March 4<\/td>\n7.34 %<\/td>\n7.46 %<\/td>\n172,278<\/td>\n12.03<\/td>\n71<\/td>\n-0.1996 %<\/td>\n1,354.8<\/td>\n<\/tr>\n
March 5<\/td>\n7.44 %<\/td>\n7.43 %<\/td>\n172,255<\/td>\n12.00<\/td>\n71<\/td>\n-1.3749 %<\/td>\n1,336.1<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

See that? It’s most peculiar … The PerpetualDiscount index got hammered today, down 1.37% which would normally be expected to be about equivalent to a 10bp uptick in yields … but the reported YTW was actually down 3bp! Today, anyway, the mean current yield did a far better job of explaining the total return of the index.<\/p>\n

So I had a little look … <\/p>\n

<\/div>\n

There’s nothing particularly surprising about the distribution – one would normally expect to see the top credits clustered in a top credits’ zone, with the distribution showing a positive skew as they tail off into the … er … not-quite-top credits’ zone (although, I hasten to add, all members of the index are rated Pfd-2(low) or higher by DBRS).<\/p>\n

But it must be remembered that I report the Median-by-Weight YTW. This was done on purpose; the problem I found while experimenting with various formats was that reporting mean-by-weight caused immense volatility in the data, as outliers had a large effect on the calculated number. This is not so much a problem with the PerpetualDiscounts index now that it has 71 members, but can be a problem with smaller data sets.<\/p>\n

Anyway, for better or worse, I report Median-by-Weight; and today the Median-by-Weight is W.PR.H with a yield of 7.43%.<\/p>\n

Now let’s look at the gaps between each of these issues:<\/p>\n

<\/div>\n

And – you guessed it! The gap between W.PR.H and the next higher yielding issue (GWO.PR.I, 7.53%) is 10bp, as large a gap as you get in the important range of yields. A few pennies worth of price changes, and GWO.PR.I would have been the median issue and the return of -1.37% would have been matched with a reported increase in median YTW of 7bp … not a perfect modified-duration-approved relationship; but then, it isn’t supposed to be.<\/p>\n

I can’t, at this point, think of any way to use this insight; but the more little odd factoids one understands, the better chance there is of achieving a useful understanding.<\/p>\n","protected":false},"excerpt":{"rendered":"

Rather an odd thing happened with the HIMIPref™ PerpetualDiscount Indices today … compare the published index data: HIMIPref™ PerpetualDiscount IndexThese values reflect the December 2008 revision of the HIMIPref™ IndicesValues are provisional and are finalized …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,10],"tags":[],"class_list":["post-5785","post","type-post","status-publish","format-standard","hentry","category-himi-preferred-indices","category-index-construction-and-reporting"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/5785","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5785"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/5785\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5785"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5785"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5785"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}