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Model Portfolio: 29 January 2010
Model portfolio underweight, looking to invest cash................ 
        

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.

 

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 104

 10,400

 87

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 99

  4,950

 177

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 101.6

 10,160

 195

9th Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 104.25

 10,425

 497

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 12

 1,200

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 105

 5,250

 95

18 Feb 2009

Tesco 5.5% Dec 2019

5,000

 103.64

 106

 5,300

 44

26 Feb 2009

Roche 5.5% March 2015

10,000

 99.37

 104

 10,400

 516

26 March 2009

John Lewis 6.375 Jan 2012

5,000

 101.76

 107

 5,350  8
22 May 2009 UK Gilt War Loan 3.5% undated 7,000  73.6  73  5,110  46
15 June 2009 Anheuser Busch 6.5% June 2017 10,000  99.625   111  11,100  413
16 Aug 2009 RBS "Royal Bond 5.3% 2015 50  100

 102

  5,100    /
09 Aug 2009 Rabobank 4% Sept 2015 10,000  99.75

 102

 10,200  167

 

Category Sum            Notes
Securities

94,945

Valuation of current holdings
Accrued

2,245

Interest accrual on above 
Cash

12,410

Including interest & coupons received. 
     
Total

109,600