Saturday, February 2, 2013

Newbie's bond portfolio performance - Jan 2013

Presentation Style 1

Initial Capital = USD150k+SGD430k+EUR14k = USD516,499.36 equivalent (at month-end FX rates)
End 2013 January Net Portfolio Value = USD506,264.29

Year to Date Portfolio performance = -1.98%

Presentation Style 2

Initial Capital = USD521,393.82  / SGD635,773.20
End 2013 January Net Portfolio Value = USD506,264.29 / SGD626,449.03

Year to Date Portfolio performance = -2.90% (USD terms) / -1.47% (SGD terms)


Gross coupons received in the month = USD5,062.50 (Macquarie and Cloverie)
Gross coupons received YTD 2013 = USD5,062.50

Projected net leveraged coupon yield = 16.11% p.a.*

* 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.

Comments for the month
Bond prices softened significantly in the last 2 weeks of January 2013 as a result of the 10 year UST spiking to 2% and above. Should the long term interest rate continue moving up or even sustaining at 2% region, it would affect the attractiveness of holding long term bonds, particularly perpetuals with fixed for life coupons. The effect of the 10 year UST spiking has resulted in my perpetual bonds dropping by 2-4% on average with my fixed tenor bonds dropping by about 1-2% on average. My big bet on Unicredit 5.5% SGD has yet to pay off with the bond still under par.

Style 1
I have decided to convert my Initial Capital of USD+SGD+EUR cash amounts into USD equivalent at every month end's FX rates to arrive at a USD equivalent figure. I would then compare the Bank system calculated USD portfolio value with the Initial Capital to determine my portfolio performance. YTD Portfolio performance is -1.98% using this measure which reflects the decline of my bond prices. Downside of this style is that my Initial Capital figure in USD terms will fluctuate on a monthly basis rather than a 'locked in' value as per Style 2.

Style 2
I have decided to measure my portfolio performance in both USD and SGD terms every month as I noticed the USD/SGD exchange rate does affect my performance ratios. For example in the month of January 2013, the USD/SGD rate has moved up from 1.2191 to about 1.24 now. As bulk of my Initial Capital is in SGD (which was NOT converted into USD), the -2.90% performance in USD terms may not accurately reflect the true performance of my portfolio. Neither is the -1.47% in SGD terms a completely accurate measure since I also have USD and EUR making up my initial capital. These are all measurement limitations that I have to be aware of.

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