Analysis & Comment  > Model Portfolio

Share |
Back to 2010

Model Portfolio: 25 August 2010

Strong gilts market lifts valuations of our corporate bond portfollio............

    

We are holding in long-only portfolio during one of the fiercest rallies that the bond market has seen in some time. Thus, we see a decent uplift on our bottom line valuation. However, corporates have in general lagged the sharp price increases seen in long-dated gilts. In due course, the corporate bonds may well catch up but its fair to say that we have been somewhat over-long credit and somewhat underweight duration. We would have done better switching the whole lot into long-dated gilts in the spring (with the benefit of hindsight). This does somewhat prove the point that the highest yielding bond is not always the best performing.

There have been a few changes in the model portfolio since the last valuation, namely:

  • Selling our Tesco 5.5% 2019 bonds at 107
  • Selling our Roche 5.5% 2015 bonds at 110.38
  • Buying 5,000 of the RBS 5.1% 2020
  • Buying 6,000 of the rather speculative Enterprise Inns 6.5% 2018 (see last weeks BOW) 

 

Going forward, our cash levels remain rather higher than they should be in a bull market. Also, we have 10,000 Merrill Lynch bonds maturing next month. Once again, its time to get buying.... the problem is; what? In the current environment, pickings are becoming fairly slim.

 

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 109

 10,900

 399

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 105.5

 5,275

 54

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 100

 10,000

 478

9th Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 107

 10,700

 246

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 34

 3,400

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 106.5

 5,325

 240

09 Aug 2009 Rabobank 4% Sept 2015 10,000  99.75  106.5  10,650  389
16 Aug 2009 RBS "Royal Bond 5.3% 2015 100  100

 103

 10,300  /
04 Feb 2010 GKN 6.75% 2019 10,000  97.56  105  10,500  566
06 May 2010 Goldman Sachs 5.5% Oct 2021 6,000  87.5  96  5,760  292
20 May 2010 Nat West 9% prefs (undated) 5,000  1.03  1.14  5,700  /
21 June 2010 Lloyds 5.375 Sept 2015 10,000 100.9  106  10,600  102
28 July 2010 RBS Royal Bond  5.1% 2020 5,000  96.03  100  5,000  147
16 Aug 2010 Enterprise Inns 6.5% Dec 2018 6,000  83.5 84.5  5,070  80

            

Category Sum            Notes
Securities

109,180

Valuation of current holdings
Accrued

2,993

Interest accrual on above 
Cash

7,321

Including interest & coupons received. 
     
Total

119,494