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Model Portfolio: 1 December 2010
Model Portfolio : 30th November 2010
The month of December has seen a fairly sharp pull-back for the bond markets. 10yr gilts are off about four points but the real pain has been felt in the financial sector and spreads here have pushed out. "True" corporates - retailers, metal bashers etc have been somewhat more resilient.
The chart shows the iShares GB Corporate Bond which has a suprisingly heavy weighting in financials. The ETF is roughly 9 points (7%) down from its peak, and that is a pretty big move in what is a traditionally low-volatility asset class. Indeed, the instrument has given back nearly all the yearís gains.
As might be expected, the model portfolio has taken a knock on a mark-to market basis. The tail end of last month saw the bottom line at £120,455. This month sees us down to £118,761. To compare the start of the year saw the portfolio (which is measured on a total return basis) at £108,440.
We have made a few minor changes to the portfolio over the month of November:
So, on balance, not a great month for the model portfolio, however, sell-offs in the market should be viewed as opportunities for long-term investors. We have some cash, and also the potential to liquidate some of our shorter, low-yield holdings. This will give us a chance to extent out into some of the higher yielding assets out there. For instance the Lloyds 6.5% 2040 is yielding 7% in the current market, and thatís a good yield for a senior bond. Some of the depressed prefs also look tempting, although our plan to buy the new Ecclesiactical (see bond of the week) somewhat fills our allocation for this asset class.
December should see us with wood to chop.