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Model Portfolio: 30 April 2012

Steady as she goes........

    

The Model Portfolio continues to make steady progress. Coupons are accruing or paying, steadily rolling up the value on a total return basis. Meanwhile, capital values are mixed, with some mark-to-market gains since the last valuation and some losses. However, We would opine that the value of corporate bonds is generally appreciating as investors chase yield. We track the average yield of the corporate bonds featured on the website, and this average now stands at 3.38% YTM. The chart of this average yields also shows a fairly consistent downtrend (see right).

There have been a couple of wrong turns over the last month. Firstly, I liquidated my holding in the Intermediate Capital Group. This proved to be a mistake; the bond has continued to appreciate and 104 bid is now seen in the market. Secondly, I had intended to switch out of my current holding in the premium-priced Provident Financial 7.5% 2016 into the new PF 7% 2017 at par. Due to a mis-communication with the broker, this order was not executed.  

Neither of these events is the end of the world, but it leaves me a little underweight with 9% in cash. Of course, cash is great for optionality but a persistently underweight portfolio will always lag the marketís performance.

Hopefully, there will be a couple of new issues before the summer to invest the cash. Another possibility is to "top up" some of the existing smaller positions.

 

Date of Purchase

Issue

Life (yrs) 

Nominal

Purchase Price

Current Price

Value  

Accrued

16 Aug 2009 RBS "Royal Bond 5.3% 2015 3 100  £100  104.9  10,490  /
24 March 2011 Provident Financial 7.5% 2016 4 6,000  100.15  103  6,180  40
21 June 2011 Places For People 5% 2016  4 10,000  100  103.8 10,380  174

7 Mar 2007

Segro 5.5% 20 June 2018

6

5,000

  97.35

 105.75  5,375  238
16 Aug 2010 Enterprise Inns 6.5% Dec 2018 6 6,000

  83.5

 81.5  4,890  158
04 Feb 2010 GKN 6.75% 2019 7 10,000  97.56  107.9  10,790   346
28 July 2010 RBS Royal Bond  5.1% 2020 8 5,000  96.03  97.4  4,870  64

13 Oct 2011

National Grid PLC 1.25 2021 9 10,000  100  103  10,300  9
06 May/19 Nov 2010 Goldman Sachs 5.5% Oct 2021 9 10,000  87.9  91  9,100  306
31 Jan 2010 Places for People 1% RPI 2022 10 6,000  100  100.25  6,015  15
20 Sept 2010 Yorkshire Building Society 13.5% 2025 CoCo 13 5,000  116

 120  

 6,000  59
08 Mar 2011 Italy 6% 2028 16 5,000  100.44  81  4,050  224
27 Sept 2011 British Telecom 5.75% July 2028 16 10,000 103.5  108  10,800  233
16 Sept/01 Dec 2010 Lloyds 6.5% Sept 2040 28 10,000  96.35  92  9,200  406
08 March Nationwide 6.875% U/D 5,000    88  90  4,500  107
12 Dec 2010 Ecclesiastical 8.625% prefs U/D 5,000   1.02  112  5,600  183

 

Category Sum            Notes
Securities

£118,540

Valuation of current holdings
Accrued

£2,562

Interest accrual on above 
Cash

£12,856

Inc. interest & coupons received. 
     
Total

£133,958

 

 

Mark Glowrey

Please note UK Corporate bonds can only be purchased over the phone please contact us on 0845 607 6002

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