Bond Portfolio Examples

Most high performing investment portfolios include some allocation towards government and corporate bonds. Just like equities, investors can choose from a variety of different bond investments, each with their own level of risk and return (yield). Fixed Income News Australia has teamed up with Income Asset Management to create two sample portfolios to demonstrate the different type of investments available and the yields from each portfolio.

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The Yield to Maturity of a portfolio is the expected return if you hold all the bonds until the maturity date and the Running Yield represents represents the return of the portfolio if you hold it for a year (calculated by dividing the coupon or distribution by the market price).

READ MORE: BOND TERMS EXPLAINED

Most bonds are traded through the over-the-counter market (OTC), that means you need to find a broker to transact on your behalf and to discover last known traded prices. It is a negotiated market where traders talk to each other and broker trades.

In Australia, the minimum OTC bond parcel size is $500,000, but some brokers will trade in smaller parcels to appeal to personal investors. Parcels begin at $10,000 per bond and there is also often a minimum investment amount. In most cases investors need to qualify as ‘wholesale investors’ to transact in this market.

Portfolio 1: Investment Grade Floating Rate Notes

Yield to Maturity: 6%+ PA^

This model portfolio has 10 securities with equal weightings of 10%, yielding 6% pa^. The portfolio is built with Investment Grade Floating Rate Notes and is for investors who are looking to manage interest rate and inflationary risk.

Sectors:

  • 50% Financial
  • 30% Utilities
  • 10% Energy
  • 10% Industrial

IssuerMarket ValueYieldMaturity/Call DateCredit Rating
Ampol500007.4309-03-2026BBB-
Liberty Financial500006.4325-05-2026BBB-
Ausnet Services500006.5207-10-2025BBB-
QBE Insurance500006.5925-08-2026BBB
Resolution Life500006.9109-12-2025BBB
Ausgrid Finance500004.8530/07/2024BBB+
Pacific National500006.5612/05/2027BBB-
Barclays500004.3320/05/2026BBB
Newscastle Perm500004.8110/02/2027BBB
AGI Finance500005.5010/10/2025BBB+

The Floating Rate Notes Yield to Maturity is using trading margin + swap to the call/maturity date

* Rating to worst applies the lower of S&P and Moody’s ratings, respectively

# For bond maturities the call date has been used

^ Prices/yields as at 20 June 2022

Portfolio 2: Short Duration Investment Grade Bonds

Yield to Maturity: 5%+ PA^

This model portfolio has 10 securities with equal weightings of 10%, yielding 5% pa^. The portfolio is built with short duration Investment Grade bonds and is for investors looking for predictable income during periods of interest rate hikes.

Sectors:

  • 40% Consumer, Cyclical
  • 40% Industrial
  • 10% Consumer, Non-Cyclical
  • 10% Financial

IssuerMarket ValueYieldMaturity/Call DateCredit Rating
Qantas Airways500005.5812/10/2026BBB
Pacific National Finance500005.6519/05/2025BBB-
Volkswagen Fin Services500004.9214/04/2025A3
Woolworths Group500004.4720/05/2025BBB
Hyundai Capital Services500005.3721/03/2025BBB+
Aurizon Network500004.7521/06/2024BBB+
Australia Pacific Airport500004.7511/11/2025BBB+
Stockland Trust500004.3822/03/2024A-
Australian Rail Track500004.2511/12/2024AA1
Toyota Finance Australia500003.5021/03/2025A+

* Rating to worst applies the lower of S&P and Moody’s ratings, respectively

^ Prices/yields as at 20 June 2022

 

Bond brokers that deal in smaller sized OTC bond parcels

CompanyDescriptionMin. InvestmentMin. Bond Parcel
abxlogoAustralian Bond ExchangeThe Australian Bond Exchange (ABE) is Australia’s pre-eminent marketplace for investing in fixed income securities. We offer better income, with less fees using the reliable and stable returns of corporate bonds for retiring and retired clients dissatisfied with risky or low returning investments.No Minimum$10,000https://www.bondexchange.com.au/invest-in-bonds-directly/
IAM LogoIncome Asset ManagementIncome Asset Management Group delivers a diverse solution for fixed income investors across Treasury Management, Cash, Bonds, Debt Capital Markets and Asset Management. We provide investors and portfolio managers with the most trustworthy and capable access to research, execute and manage their income investments.$50,000$50,000https://incomeam.com/
curvelogoCurve SecuritiesCurve Securities are term deposit and fixed interest specialists. We have been creating opportunities that elevate our clients’ performance through innovation in fixed income solutions since 2009. Our portfolio of services includes term deposits, fixed interest securities, investment management, the Curve Portfolio Manager (a way to manage and report on your investments) and Yieldhub (an online platform displaying interest rates from over 80 banks).Access available through an adviserAccess available through an adviserhttps://curvesecurities.com.au/
fiiglogoFIIG SecuritiesWe provide private investors, intermediaries and corporate market clients access to high quality fixed income investments and flexible AU$ bond financing.$250,000$10,000https://www.fiig.com.au/
fixedincomesollogoFixed Income SolutionsAt Fixed Income Solutions, we aim to provide the best expertise, pricing, liquidity and execution in the fixed income sector. Quality and efficiency lie at the heart of all we do. With our broad market coverage and global reach, we explore every opportunity to generate outstanding returns for our clients.$50,000$50,000https://www.fixedincomesolutions.com/
laminarlogoLaminarLaminar Capital is a client focused fixed income specialist providing capital markets, investment management and advisory services to institutional, middle market and high net worth clients.N/AN/Ahttps://laminarcapital.com.au/

ASX listed bonds

A range of approximately 30 Australian Commonwealth Government Bonds (ACGBs) can be traded via the ASX.

There is also a handful of corporate bonds available and a range of hybrids.

XTBs

The XTB company aim to make the benefits of ‘high quality’ corporate bonds accessible to everyone on the ASX. They identify high quality senior corporate bonds in the wholesale market and provide investors with exposure to them through individual XTBs trading on ASX.

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