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Model Portfolio: 2 May 2008
There has been a considerable change seen in the tone of the bond markets from last month’s valuation. For the first time in some months, high quality bonds are drifting off, whilst the more speculative financial and corporate names recover ................

There has been a considerable change seen in the tone of the bond markets from last month’s valuation. For the first time in some months, high quality bonds are drifting off, whilst the more speculative financial and corporate names recover (on balance). We have more of the latter than the former, so this shift has been beneficial for the Fixed Income Investor model portfolio which is now some 8% up from its starting level of £100,000 back in early 2007. This recent shift also shows the benefits of having a mix of government and non-gov bonds, which in the current environment act as a natural hedge for each other.

The last month has seen us make a few changes. We have sold half our holding in the Nationwide/Portman 6.25% PIBS, and bought £10,000 of the high-coupon Bradford & Bingley PIBS. Earlier this week we added another holding in the financial sector, namely the  Citigroup 5.125% 2018 issue.

We are now fully invested. The Vodafone bond will be maturing in July, and we have coupons due for payment in June. These events will continue to bring liquidity back into the portfolio.

Model Portfolio

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

P&L           

Accrued

16 Jan 2007

Vodafone 6.25% 10 July 2008

10,000

 100.42

 99.95

 9,950

 -47

 517

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 81.43

 8,143

 -1,381

 222

15 Feb 2007

Alliance & Leicester 4.25% December 2008

10,000

  97.46

 98.50

 9,850

 -104

 150

7 Mar 2007

Segro 5.5% 20 June 2018

10,000

  97.35

 86.43

 8,643

 -1,09.2

 485

28 Mar 2007

EIB 4.75% 06 June 2012

10,000

  96.82

 99.50

 9,950

 +268

 437

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 96.10

 9,610

 -156

 317

18 July 2007

Treasury (Gilt) 4.25% 7 March 2011

10,000

  95.20

 99.60

 9,960

 +440

 69

19 Aug 2007

Portman (Nationwide) 6.25% PIBS

 5,000

  97.50

 83.00

 8,300*

 -725

 13
9th Jan 2008 Marks & Spencer 5.625% March 2014 10,000   95.82  93.60  9,360  -222  69
10th April 2008 Bradford and Bingley 11.625 PIBS 10,000  112.00 117.00  11,700  +500  348
1st May 2008 Citigroup 5.125% Dec 2018 10,000  85.30 85.00  8,500  -30  207
Bond sub total            

 

 

 

Category Sum            Notes
Securities

£103,966

Valuation of current holdings
Accrued

£2,834

Interest accrual on above 
Cash

£1,820

Including interest & coupons received. 
     
Total

£108,620

 

NB: This valuation was overstated due to an incorrect position size/calculation for the Nationwide PIBS. The adjusted value is £104,470.

Mark Glowrey

Notes: Dealing costs are £15 per trade, and this is factored into the total valuation of the portfolio. There is no stamp duty payable on bonds, although this may be applied to preference shares and other classes of security. Valuations are based on bid-side levels.