Wednesday 22 November 2023 by Jonathan Sheridan a variety of spices Trade opportunities

Retail Sample Portfolio Update – November 2023

October’s bond markets were relatively quiet until the end of the month when there was a flurry of new issues.

During the first half government rates ground higher with small daily movements both domestically and in the US but then in the last week US rates bounced off the key 5% level in the 10-year bond and began a fall that continued post the softer than expected CPI report a week ago.

The narrative has clearly diverged between Australia and the US. Rate cuts are being priced in earlier over there whereas here new Governor Bullock is being hawkish, with the RBA raising rates on Melbourne Cup Day.

Three new bonds were added to the retail menu, all subordinated issues from the major banks.

- ANZ 6.405% 2029c Fixed

- CBA 6.86% 2027c Fixed

- CBA BBSW +2.70% 2027c Floating Rate Note

fiig australian bond fund

Retail Sample Portfolio

The Sample Retail Portfolio is a balanced portfolio, where we include a mix of investment grade and selective higher-yielding exposures while still maintaining a balance between risk and return, skewed towards preserving capital rather than chasing yield.

It aims to have around 10 positions, with the higher-yielding bonds in smaller parcel sizes to reflect their assumed higher risk. Currently, the portfolio holds 14 bonds, which provides better diversification.

The portfolio yields an indicative 6.61%* to the assumed maturity dates and is an approximate $215k spend.

Despite three new bank bonds being made available this month, none were included in the portfolio as it already contains the NAB BBSW +2.80% 2027c bond. These major bank-subordinated bonds are essentially identical, so investors can pick a spread of issuers to spread the minimal risk and adjust coupons as desired.

The running yield of the portfolio is also fairly strong at just under 6%, so picking up coupons whilst waiting for attractive new bonds to arrive is a good strategy.

The Sample Retail Portfolio, along with the full list of retail available bonds (and Factsheets from our FIIG Credit Research Team on each bond), can be found on the FIIG Website here.

*Please note the indicative yield shown is the expected yield to the assumed maturity/call dates of the bonds included in the portfolio, based on swaps rates at the time of writing.