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Model Portfolio: 3 November 2009

Corporate bonds pull back from recent price highs.......................

    

The halcyon days of summer are now behind us, at least for Sterling bonds. Five year gilts are off a couple of points from this time last month, and the average corporate bond has been dragged down with them. However, the income continues to roll in, so our total return portfolio is up a little from last month. To a certain extent, this is the beauty of bonds as an investment class - you can win by doing nothing.

There have been no radical developments in our portfolio. At present, we are virtually fully invested with only 2,000 of spare cash. The plan is to wait until more coupon flows come in (December) and reinvest. We will not have enough money for a new holding, but will probably look to "top up" one of our existing 5,000 positions. The RBS "Royal Bond" fixed income certificate is a contender for this role, as the security can easily be bought in small and "odd-lot" size. This is a useful feature of this security. Hopefully the next couple of years will see more of these retail-targeted issues.

In the meanwhile, we will keep an eye open for potential profit taking opportunities. Over-par bonds with relatively short maturities may face the chop, providing we can obtain a decent bid in the market. The GE Capital 4.75% 2011 is a good example of this (see chart, above right).

 

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

100.5

 10,050

 507

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 93

 4,650

 106

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 101.25

 10,125

 64

19 Aug 2007

Portman (Nationwide) 6.25% PIBS

 5,000

  97.50

 82

 4,100

 15

9th Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 101.5

 10,150

 354

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 10

 1000

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 100

 5,000

 28

20 Oct 2008

GE Capital 4.75% 15 Jun 2011

5,000

 88.46

 103

 5,150

 155

18 Feb 2009

Tesco 5.5% Dec 2019

5,000

 103.64

 103.5

 5,175

 249

26 Feb 2009

Roche 5.5% March 2015

10,000

 99.37

 105.5

 10,550

 376

26 March 2009

John Lewis 6.375 Jan 2012

5,000

 101.76

 106

 5,300  247
22 May 2009 UK Gilt War Loan 3.5% undated 7,000  73.6  74  5,180  105
15 June 2009 Anheuser Busch 6.5% June 2017 10,000  99.625   110  11,000  247
16 Aug 2009 RBS "Royal Bond 5.3% 2015 50*  100

 100.1

 5,005  /
09 Aug 2009 Rabobank 4% Sept 2015 10,000  99.75

 99.0

 9,900 65

 

Category Sum            Notes
Securities

102,335

Valuation of current holdings
Accrued

2,518

Interest accrual on above 
Cash

2,039

Including interest & coupons received. 
     
Total

106,892