Riding the Rockies: Trading Update: February 15, 2012

February 23, 2012 § Leave a comment

Build America Bonds have been a good performing component of many of our portfolios, as you can tell from the annual performance, shown above, of the BoA ML Build American Bond Index, which BAB attempts to replicate.

While I’ve been tempted to sell or reduce the BAB position, I’ve held off and it’s benefitted most of our clients. Why did I wait? First, the yield is healthy and rates are not increasing so the net asset value of the portfolio has remained predictable and consistent. Second, the current rate of distribution, well in excess of the 10 year U.S. Treasury bond, has been very good. Third, the supply of Build American bonds is diminishing and I believe that there may be some more premium in this unique class of bonds, to squeeze out. So, for the moment, we’re holding our Build America Bonds.

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