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Model Portfolio: 31 October 2010

We take a profit in Rabobank, leaving us with more spare cash to invest................... 

    

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.

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 108

10,800

499

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 103

5,150

103

9 Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 107

10,700

346

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 35

3,500

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 106

5,300

25

16 Aug 2009 RBS "Royal Bond 5.3% 2015 100  100

 104

10,400   /
04 Feb 2010 GKN 6.75% 2019 10,000  97.56  103.5 10,350 11
06 May 2010 Goldman Sachs 5.5% Oct 2021 6,000  87.5  95 5,700 20
20 May 2010 Nat West 9% prefs (undated) 5,000  1.03  110 5,500  /
21 June 2010 Lloyds 5.375 Sept 2015 10,000 100.9  105 10,500  86
28 July 2010 RBS Royal Bond  5.1% 2020 5,000  96.03  97.5 4,875   192
16 Aug 2010 Enterprise Inns 6.5% Dec 2018 6,000  83.5  89 5,340  160
16 Sept 2010 Lloyds 6.5% Sept 2040 5,000  98.41  101 5,050   42
20 Sept 2010 Yorkshire Building Society 13.5% 2025 CoCo 5,000  116  118.5 5,592.5   63
04 Oct 2010 Barclays Inflation-linked Oct 2020 5,000  100  99  4,950  /

Category Sum            Notes
Securities

103,710

Valuation of current holdings
Accrued

1,547

Interest accrual on above 
Cash

15,198

Including interest & coupons received. 
     
Total

120,455