Analysis & Comment > Model Portfolio
Back to 2010
Model Portfolio: 31 October 2010
Model Portfolio : 31 October 2010
Once again, the model portfolio has been keeping us busy. We have taken a profit in our £10,000 holding in Rabobank (see Bond of the week from Oct 12th). Also, In the middle of the month I purchased the new Barclays 10yr inflation linked bond. The bond offers 3% minimum coupon and/or the change in RPI (whichever is higher). Not a bad deal, however last week saw a competitor in this field - the RBS inflation linked bond featured in Bond of the week here. The pricing differential between the two issues can be accounted for to some degree by the longer maturity of the RBS deal (12 vs 10 yrs) and the superior credit rating of Barclays. However, the RBS deal with its 3.9% minimum coupon offers better value to my mind and I intend to switch. I will be taking a small loss (circa 1% + dealing com ) on the sale of the Barclays IL bond.
As ever, we have spare cash to invest, circa £15,000. This is one of the advantages of fixed income investing - coupon payments and redemptions keep the liquidity flowing back into the portfolio. This can be used to purchase more assets and is particularly beneficial during market pullbacks. Equity investors do not get this opportunity and often have to sit and wait for a recovery.
I am keeping my eyes open for new issues and/or any special situations (takeovers, credit downgrades etc) with a view to picking up bonds yielding between 5 and 7%. We shall see what the next month brings forth.