Tuesday 24 April 2012

Portfolio Sale: Halifax 11% 2014 (EH14)

Sometimes selling a holding in the portfolio feels like harvesting a crop that has grown over a long time. But it just needs a few taps on the keyboard, rather than a skilled sweep of a razor-sharp scythe.

So, apart from having temporarily come over all bucolic, why would anyone sell a corporate bond that is yielding over 10% and which matures in a couple of years? Certainly not fear: Halifax was acquired by the Lloyds Banking Group and this security has become less and less risky as Lloyds has stabilised.

Those at the back of the class paying attention may recall a previous post 'Yield? What Yield' - if so, full marks. Sometimes the current or income yield looks great but delve a little further and you might be tying up your money for a disappointing yield-to-maturity (or redemption yield).

This was one of the first corporate bonds I bought - and quite a stretch it was, as it is one of those that has a minimum trade of 10,000 units. But it has been great over the years, providing a regular income. I did pay a premium over par, so I was partially getting my own money back but the income yield has been consistently around 10%.

Although the coupon is a whopping 11%, the current price and the fact that the security matures in 2014 means that the yield-to-maturity is now only 5.75%. I can do better than that - for example, with the longer-dated Halifax 9.375 2021 corporate bond - yielding over 9% for both income and yield-to-maturity.

So, it was time to wield the blade and try something new.

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. Stupid question but I see you use TD Direct too. Are you able to trade these (corp bonds) online with them? I'm unable to get a price via their website?!

    1. James

      A good question actually. The TD Direct Stocks & Shares ISA is 'free' but has limited on-line access to fixed-income securities - at the most a few preference shares. You might be able to phone up the dealing staff and trade some others.

      I also have an iDealing account which has a lot more choice, but there is a quarterly charge.

  2. Hi
    Excellent blog.
    In your portfolio you list
    HALIFAX PLC 9 3/8%
    but in this entry it's
    HALIFAX PLC 9.375%
    both seem to be traded on the LSE as HALP and 98IV (EH21).
    Any idea what the difference is?

    Many Thanks