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Model Portfolio: 14 July 2011
Model Portfolio : 14 July 2011
In the six weeks since the last valuation we have made a couple of moves in the model portfolio. The Marks & Spencer has now gone and I have reduced our exposure to Lloyds. We were a bit overweight for this credit and I have sold the Lloyds 5.5% 2016 and the Natwest 9% prefs accordingly. All together, that gives us a spare £17,000 of cash that needs to be put to work at some point.
We have one new addition - the Places for People 5% 2016. This bond was a recent new issue and has traded up to a 2 point premium. Even allowing for the two-point premium, this bond offers a spread of 250 over gilts and remains very good value. I expect it to tighten further.
Credits, particularly financials, have been soft so the cash should enable us to get some value. However, the underlying gilt market has been strong and that rising tide is going against our re-investment plans. in absolute price terms, the portfolio is roughly where it was last month.
US bank credits are one possibity - see Bond of the week from the 5th July. In a perfect world, I’d like to see gilts pull back before I invest, but I may not have that chance.
Duration-wise we are bit underweight bonds in the short end. The problem is, yields for sub 3-year bonds are so low that these assets are not worth buying. This in turn forces one to be over-long duration, a situation that creates risk if we see an across-the-board sell-off.
Date of Purchase Issue Nominal Purchase Price Current Price Value Accrued 7 Mar 2007 Segro 5.5% 20 June 2018 5,000 97.35 104 21 83.5 45 8
Date of Purchase
7 Mar 2007
Segro 5.5% 20 June 2018