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Model Portfolio: 30 April 2012
Model Portfolio : 30 April 2012
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.