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Model Portfolio: 3 November 2009
Model Portfolio : 3 November 2009
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).