Hi Lisa, Re: Corp paper and the future...............
Corporate paper certainly was nicely discounted over recent months. With that so were corporate bond funds. Years ago when I used to buy individual corporate bonds, this was when I liked to be doing my buying - when the discounts on the paper were the greatest and the effective yields were also very large. So, in buying corp bond funds (and preferred funds) we're essentially doing the same thing.
There's a greater chance of some of the paper defaulting than other times, but that has been priced into the funds. This also means there's a good chance for some capital appreciation along with cliping some nice coupons along the way. The deepest discounts are in the Corporate and REIT areas right now. Govt. paper, depending upon average duration isn't discounted much at all. In come cases the longer govt bond funds are actually selling at a premium to NAV and to the papers' value at maturity.
So, assuming the folks at Calamos and other funds have been doing their homework, they should have positioned these funds for a nice future.
A significant portion of my overall portfolio is committed to such funds, as I use them to pay my living expenses. I add to those positions when there's a lull as in the last 15 months so that my income keeps up with inflation. Sometimes many years will go by with the yields and Premium/Discounts in an area that's not very attractive. So, we need to make Hay while the sun's shining.
Best regards,
Tom
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