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Model Portfolio: 6 January 2010

Year end results for 2009.............................

    

The last few weeks of 2009 saw the long end of the Gilt market sell off, weighed down by negative sentiment on the prospects for the UK’s public sector finances and the prognosis for the country’s triple-A credit rating. Against this "push" was also a "pull" from confident equity market, which saw the FTSE100 break above the resistance at 5,400 that had held the market back since November.

Corporate bonds have tracked the general price-shift seen across the gilt curve, but retain a better "tone", with brokers reporting more buyers than sellers and a general shortage of supply in the secondary market.  Indeed, several of our holdings, particularly in short and medium-dated corps, are up on the month.

Our cash position has increased over the last month to over £12,000. We have taken a couple of profits on bonds that had performed strongly and marched up to levels well over par. We also have decided to sell our small holding in the Nationwide PIB, reasoning that on a 7.4% running yield, the risk-reward ratio of this instrument is not that attractive. The move also reduces the overall duration of our portfolio.

Going forward, we may well see a further sell-off in the Gilt market over the next month or so, but bear in mind that bonds are not quite like equities - they have redemption dates. With this in mind, we will be using our reinvestment cash flows from coupons and redemptions to buy more corporate bonds, hopefully locking in some decent yields.  With cash in our pockets, this would be a desirable scenario for us - we’ll see what happens.

 

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 102.5

 10,250

 41

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 96.5

 4,825

 154

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 101.2

 10,120

 153

9th Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 103

 10,300

 451

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 10

 1,000

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 103.5

 5,175

 74

18 Feb 2009

Tesco 5.5% Dec 2019

5,000

 103.64

 104.5

 5,225

 21

26 Feb 2009

Roche 5.5% March 2015

10,000

 99.37

 106

 10,600

 471

26 March 2009

John Lewis 6.375 Jan 2012

5,000

 101.76

 106.5

 5,325  301
22 May 2009 UK Gilt War Loan 3.5% undated 7,000  73.6  72  5,040  24
15 June 2009 Anheuser Busch 6.5% June 2017 10,000  99.625   108.5  10,850  359
16 Aug 2009 RBS "Royal Bond 5.3% 2015 50  £100

 £101.75

 5,087  /
09 Aug 2009 Rabobank 4% Sept 2015 10,000  99.75

 100.5

 10,050  134

 

Category Sum            Notes
Securities

£93,847

Valuation of current holdings
Accrued

£2,183

Interest accrual on above 
Cash

£12,410

Including interest & coupons received. 
     
Total

£108,440