Q: Hi Guys
what your guess on HPYT.U when int. rates start to move down
Bob
what your guess on HPYT.U when int. rates start to move down
Bob
5i Research Answer:
HPYT.U invests in long-dated US treasuries and writes covered calls against them. Its portfolio thus is quite sensitive to rates. 71% of its portfolio has a maturity of 20 years+. When rates fall in the US, its portfolio will increase in value, but the call options may limit some of the gains. Still, it is up nearly 7% in the past three months as investors anticipate lower rates. We might target a 10%+ return here if rates act as they are expected to. The reverse would be true if rates rose instead of fell (this would also be a shock so unit value might even be more impacted).