Q: Q: Thinking about a covered call strategy for a swap from proceeds from cig447 which is currently 21% of portfolio for monthly retirement income.I am considering 25% to ZWP,25% to ZWU, 25% to ZWB, 12.5% to GLCC, and 12.5% to FRU. Decent swap, hold, or other for a 7% monthly payment with less return of capital? Thanks Larry
5i Research Answer:
While a lot has changed for the bond market since the first half of 2022, the changes to yields of maturity longer than two years have not been as pronounced. Year-to-date returns have been positive in nearly every sub-asset of the fixed-income market. We think at 21% CIG447 is a significant exposure and would be okay swapping some or all of it out. We would be okay with the names listed above as long as the risks of covered calls are understood.