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Model Portfolio: 29 January 2010
Model Portfolio : 3rd Feb 2010
A mixed month for the bond portfolio. Gilts have been down, and then up again. Corporate spreads have, on the whole, been pushing out, finally reversing the seemingly 2009 unstoppable bull market of 2009.
However, on balance the valuation is up for the month. Income slowly accrues and whilst spreads do move in and out, the demand for sterling corporates - particularly known names in retail size - keeps edging up valuations.
For the moment I am avoiding having too much duration on the book - the only exception being the position in War Loan. I am not keen to sell this bond (which has a fairly wide bid-offer spread), but if we see another bounce, I will probably take a profit.
There is not much by the way of developments for our Bradford & Bingley PIBS - we took a big hit on this last year and are left with a security of little value. At pennies in the pound, these PIBS are not worth selling and we await the outcome of the compensation scheme enquiry with fingers crossed. A report is sheduled for June this year, which you can read about here. I note that the PIBS are slightly better bid in the market, and I mark the position up to 12p for the moment. We may yet see a better outcome.
Otherwise, bonds trading over par are always under consideration for profit taking, particularly if they in the shorter end. Profit from these can be re-invested in current-coupon new issues, as and when they emerge. On this basis, we are selling our holding in the Anheuser Busch bond. This securtity has been an excellent performer - bought as a new issue with a decent yield of over 6.5%, we have enjoyed six months of above market yield plus around 11 points of capital gains.