The thinking is the same: at some stage soon government bond prices are going to fall (as Quantitative Easing unwinds), meaning that the yields from these 'safe' government securities will rise, bringing down the price of other fixed-income securities.
I bought these Halifax plc 9 3/8% 2021 corporate bonds back in March 2012: back then I was excited about the 9% yield. Now. although the yield is still attractive, the price has risen by over 20% and as well as the looming QE correction, I am aware that the maturity clock is ticking. So there seems little scope for further capital gains.
I have to admit that the sell decision is not so clear-cut as for the Lloyds preference shares: it comes down to a fairly narrow trade-off between:
- cash now, from a sale, or
- cash later, in the form of annual coupons and the final maturity payment in 2021
However, I am concerned that there might be a 'fire sale' of fixed-income securities during the next year or so - and as I plan to be away for a few weeks in the summer, I am cashing out where there is a price premium. I plan to continue to hold the fixed-income securities that I have bought below par and where there is less of a price bubble.
[Sale price: £1.2475]
I am not a financial adviser 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.