An interesting feature of PPT is that it has a negative effective duration of about -1.0, which means the fund actually benefits from higher interest rates. For this reason, I like to use PPT as a hedge against other closed-end bond funds when it is trading at an attractive discount to net asset value.
When I wrote the previous article on PPT back in April, it was selling at about a 5% discount. A good selling opportunity became available in early October, when PPT sold at a premium over NAV for about five days. But opportunity appears to be knocking again! Recently the PPT discount has widened considerably to 8% (even though the NAV has been stable) and there is another chance to repurchase PPT at an attractive price.
Asset Class Breakdown (as of 09/30/2012)
High-yield corporate bonds
Residential MBS (non-agency)
Investment grade corporate bonds
Non-US sovereign CDS
Here are some other stats on PPT:
Ticker: PPT Putnam Premiere Trust
- Total Assets= 828MM
- Number of Issues= 889
- Average Bond Price= 92.41
- Annual Distribution (Market) Rate= 6.70%
- Last Monthly Distribution= $0.03 (Annual= $0.36)
- Fund Expense ratio= 0.83%
- Discount to NAV= -8.05%
- Average 52 week discount= -4.37%
- Effective Duration= -1.58
- Leverage: 0.0% (but fund uses derivatives and short sales)
- Average daily volume= 359,000
- Average daily dollar Volume= $2.0 million
Overall, I think PPT is a very good value at its current discount, especially in a tax deferred retirement account. When the Fed starts to raise interest rates again, the negative effective duration will help its relative performance and provide good diversification benefits when combined with other positive duration closed-end bond funds.