Presentation Style 1
Initial Capital = USD150k+SGD430k+EUR14k = USD517,428.40 equivalent (at month-end FX rates)
End 2013 January Net Portfolio Value = USD506,264.29
End 2013 February Net Portfolio Value = USD508,659.81
End 2013 March Net Portfolio Value = USD493,682.75
End 2013 April Net Portfolio Value = USD505,713.88
Year to Date Portfolio performance = -2.26%
Presentation Style 2
Initial Capital = USD521,393.82 / SGD635,773.20
End 2013 January Net Portfolio Value = USD506,264.29 / SGD626,449.03
End 2013 February Net Portfolio Value = USD508,659.81 / SGD628,810.34
End 2013 March Net Portfolio Value = USD493,682.75 / SGD612,561.56
End 2013 April Net Portfolio Value = USD505,713.88 / SGD622,786.64
Year to Date Portfolio performance = -3.01% (USD terms) / -2.04% (SGD terms)
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Gross coupons received in the month = USD13,457.62 (Cloverie 8.25%, CNP 7.5%, and GLP 5.5%)
Gross coupons received YTD 2013 = USD20,520.12
Projected net leveraged coupon yield = 15.99% p.a.*
Comments for the month
With the 10Y UST yield remaining significantly below 2% (UST price up) and the expectation that interest rates will continue to remain low for extended periods, coupled with no end in sight to QE, bonds have continue to maintain their upward momentum as investors hungry for yield continue to pile into fixed income as well as high yielding equities. My big bet on Unicredit 5.5% SGD continues to drag on my portfolio performance with its price in the 94 region. Although Italy had re-elected their President as well as Prime Minister, the market needs to see definitive action taken resulting in stability before we can see any significant rally in the Italian bond market. Italian sovereign bonds have rallied a bit in recent weeks but the effect has not flowed down to the Corporate Bonds. Although the price of my Unicredit bond continues to be below par, as long as I do not sell it (hold till maturity), I would not be too concerned with the price as I continue to receive the high 5.5% p.a. coupons (high for investment grade 10NC5 SGD bond) and will receive 100% back upon maturity (assuming no default).
The benefits of regular coupons being received from a fixed income portfolio can be observed from my example. Even though I am losing 6%+ on paper on my Unicredit bond purchase price, the coupons received from all my bonds as well as paper gains from my other bonds have significantly offset the Unicredit paper loss, resulting in just a 2-3% overall paper loss for my portfolio. Even if my Unicredit bond continues to remained depressed, I would expect my portfolio to breakeven soon from the continued receipts of coupons from the bonds.
Known portfolio measurement weaknesses
1. I had converted SGD500k of loans into USD @ 1.239 in order to save on loan interest costs in this new portfolio. Simultaneously, in my main portfolio, I had switched USD loans into SGD (loan interest rate arbitrage across my main and new portfolio). Although there is no Net FX exposure when I look across my main and new portfolios, I have created Net Short USD exposure in my new portfolio. Based on my estimations, every 0.01 upward movement in the USD/SGD rate will result in an artificial SGD5k loss in my new portfolio, and vice versa.
2. Bank pricing valuations for bonds, particularly SGD, may not be accurate. For instance, GLP is priced at 102.25 as at End February when traders are quoting 103.5/104.
*. I am aware that the projected net leveraged coupon yield does not factor in the losses I would suffer in the event my premium bonds are called or redeemed (conversely, gains on discount bonds are not included as well). This is just a projection of my Net Coupons received annually.
