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Model Portfolio: 28 February 2009

We make a few changes in the model portfolio, reducing our subordinated exposure and investing cash in non-financials..............

        

We have been keeping ourselves busy this month with the www.fixedincomeinvestor.co.uk Model Portfolio. Several ideas that we have featured in the Bond of the Week, and last month's portfolio review have been executed as follows:

  • A trade in War Loan. We bought  £5,000 nominal of this volatile undated gilt for a trade at the end of January, taking a punt on recovery from the bottom of the range. This gambit came good fairly quickly and we subsequently realised a profit on the trade; in at 76 and out at 82 a couple of weeks later.
  • Reviewing our portfolio, we decided to cut our losses on the subordinated Citigroup 5.125% 2018 issue, selling our £10,000 holding at a price of 60. Continuing weakness in the share price is unsettling and whilst booking a loss is not much fun, capital protection is important. We note that liquidity in subordinated issues continues to be very thin and bid-offer spreads wide.
  • We bought £5,000 nominal of the Tesco 5.5% Dec 2019 (see the Bond of the week feature from the 18th Feb for more on Tesco bonds).
  • And finally, we add £10,000 nominal of the new 6 year maturity Roche 5.5% March 2015  issue, locking in a yield of 5.6% for the portfolio and adding more industry-group diversification.  We will cover this issue in more depth in next week’s Bond of the Week.

Valution for the portfolio are up from last month’s figure, reflecting the general improvement in corporate bonds. We remain underinvested (i.e. cash rich) and will be looking for more investment opportunities over the next month.  

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

82

 8,200

 123

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

64

 3,200

 194

28 Mar 2007

EIB 4.75% 06 June 2012

10,000

  96.82

106.5

 10,650

 353

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

98.5

 9,850

 227

19 Aug 2007

Portman (Nationwide) 6.25% PIBS

 5,000

  97.50

84

 4,200

 115
9th Jan 2008 Marks & Spencer 5.625% March 2014 10,000   95.82

94.5

 9,450  533
10th April 2008 Bradford and Bingley 11.625 PIBS 10,000  112.00

20

 2,000  141
23 July 2008 Experian (GUS) 6.375% July 2009 5,000  98.95

 100

 5,000  202
20 Aug 2008 Next 5.25% Sept 2013 5,000  86.5

  89.0

 4,450  112
20 Oct 2008 GE Capital 4.75% 15 Jun 2011 5,000  88.46

  101.1

 4,975  171
27 Nov 2008 British Telecom 8% 2016 5,000  97.5

 106.5

 5,325  96
18 Feb 2009 Tesco 5.5% Dec 2019 5,000  103.64      101.25  5,062  61
26 Feb 2009 Roche 5.5% March 2015 10,000  99.37

 99.50

 9,950  0*
Bond sub total

 * Note: The Roche bond is a new a new issue. Payment is 4th March.

Category Sum            Notes
Securities

£82,312

Valuation of current holdings
Accrued

£2,328

Interest accrual on above 
Cash

£12,797

Including interest & coupons received. 
     
Total

£97,437