Yield to Maturity

This investment grade model portfolio has 10 securities with equal weightings of 10%, yielding 6.7%pa^. The portfolio is built with Investment Grade Bonds and is for investors who are looking to manage risk and earn higher than average yield.


Investment Grade


High Yield


1-3 years


3-5 years


5+ years








Consumer cyclical



Issuer Fund Holding Yield Type Maturity / Call Date# Equivalent Rating* Research
AirNZ $50,000 5.88% Fixed 25/02/2029 BBB hide
Ampol $50,000 7.37% Floating 19/03/2027 BBB- Click here
Aurizon Finance $50,000 5.96% Fixed 09/12/2027 BBB+ Click here
ANZ Bank $50,000 6.36% Fixed 10/02/2033 BBB+
BNP $50,000 7.92% Fixed 10/01/2025 BBB- hide
Challenger $50,000 6.60% Fixed 16/09/2027 BBB Click here
Lend Lease Finance $50,000 6.85% Fixed 31/12/2030 BBB- hide
Liberty Financial $50,000 7.45% Floating 05/04/2027 BBB- Click here
Commonwealth Bank Australia $50,000 6.37% Fixed 15/03/2033 BBB+ hide
Suncorp $50,000 6.59% Floating 01/12/2028 BBB+ Click here

Click here to view Pricing and Coupon for each bond
The Floating Rate Notes Yield to Maturity is using trading margin + swap to the call/maturity date.
*S&P ratings. Where not available, Moody’s ratings displayed.
^ Prices/yields as at 28 February 2023

Portfolio Overview

Please find the March update for IAM’s Wholesale Investment Grade Model Portfolio.

The portfolio will invest in a range of liquid, investment grade fixed and floating rate corporate bonds. The portfolio is for investors who are looking to manage risk and earn higher than average yield, while striking the right balance between fixed and floating rate securities in the current interest rate environment. The portfolio will aim to outperform the AusBond Composite Credit Index (BACR0) over the medium to long term.

The credit optimism of early 2023 faded as higher interest rates began to bite. The US regional banking crisis was followed by the collapse of Credit Suisse. The fall of Credit Suisse shows that even the largest, well-regulated banks are not immune. Credit spreads on CoCo’s (contingent capital securities) moved wider as investors speculated over the recovery-rate applied to Credit Suisse’s CoCo’s. The portfolio does have exposure to BNP CoCo’s but we are comfortable with the risk profile here with BNP being the dominant French bank.

Prices/yields as at 31/03/2023.

Portfolio Update – March 2023

Projected Cash Flows

The projected cash flows (2 year forward) is the forecasted income investors would receive from investing $500k in the Investment Grade Model Portfolio.

Cash flows are calculated based on next call for principal cash flow.

Cash flows for fixed rate bonds are set. Cash flows for floating rate bonds assume a future rate of underlying index BBSW3M for all coupon refixes.



Monthly Performance (as of 31 March 2023)
ASX200 Index (AS51)
AusBond Composite Index (BACMO) 4.99%
AusBond Composite Credit Index (BACRO) 4.59%
Investment Grade Model Portfolio


AusBond FRN Index (BAFRNO) 2.05%

While credit spreads were wider, the portfolio’s interest rate exposure provided a good hedge to performance over the month. As expected, underperformance in March came mainly from the portfolio’s position in BNP CoCo’s (-9.49%). Outperformance came from the portfolio’s position in the Origin Energy 2.65 11/11/27s (+3.79%), Aurizon 3 03/09/28s (2.67%), Lendlease 3.7 03/31/31s (2.47%), and the new CBA 6.704 03/15/38s (2.63%). During the month, the portfolio participated in the new CBA 6.704 03/15/38s as well as the Liberty Financial Float 03/16/28 issues.

We exit the Origin Energy 2.65 11/11/27s which had performed quite well following the takeover news. The Liberty Financial Float 03/16/28 was a straight switch from the Liberty Financial Float 04/05/27 to extend out the credit curve.

Performance is measured as a total return.

Click here for more information on the above indices

Market Commentary

In what could be considered a tumultuous month for global markets, particularly the banking sector, domestic markets followed a typical risk-off sentiment. The ASX 200 fell 1.11%, and the Australian dollar weakened by 0.65% against the Greenback. Yields rallied in a steepening move, resulting in the 3-year/10-year Government bond spread widening to 36 basis points. Credit spreads widened over the month amongst banking sector issues.

Despite raising the cash rate, a further 25 basis points for a tenth consecutive month, the RBA meeting minutes portray a dovish tone, further accelerating the lower yields; it’s becoming clear any indications of a softening economy will result in a pause to reassess the outlook. Whilst unemployment numbers indicated the local job market remains robust, consumer price data extinguished hawks late in the month. Against expectations of a monthly CPI annual increase of 7.2%, actual February figures were weaker at 6.8%, down from 7.4% for the month prior. Furthermore, February retail sales grew by 0.2%, following an increase of 1.8% in January, indicating that consumers are beginning to tighten discretionary spending as higher cost of living pressures accelerate. By month end, the consensus suggests a likely rate pause at the April board meeting.

In the United States, the unexpected collapse of two regional banks within three days sent stocks into a freefall as customers rushed to draw down accounts. Regulators were quick to assure depositors of the resilience of the banking sector and the security of customer funds. Gold prices accelerated by 7.79% for the month, and the 10-year Treasury yield fell from 3.92% to 3.46%. US CPI data was released in line with expectations, and despite the ramifications of sustained higher rates, Fed officials increased the fund’s rate to 5.00%.

In Europe, UBS Group agreed to purchase rival Credit Suisse after a loss of confidence which threatened to spread across global markets. The transaction was brokered on short notice by the Swiss Government, which included a 60% discounted purchase price and a 100billion-Franc liquidity facility to withstand potential losses due to winding up Credit Suisse’s operations. Most controversially, over 16billion-Francs worth of Additional Tier 1 securities were contractually written off. In an attempt to restore the market’s sentiment toward AT1 securities, the UK and European banking regulators reiterated that under normal market conditions, these securities should only bear losses after equity has been fully absorbed.

Portfolio Commentary

Credit spreads were weaker over March, especially across bank CoCo’s given the US regional banking crisis and collapse of Credit Suisse. Australian credit spreads outperformed their offshore counterparts but were also impacted. Subordinated Tier 2 spreads were around 10bps wider with non-financial corporate spreads mainly unchanged over the month. We remain constructive in the 3-to-5-year part of the credit curve, which is where we see the best relative value.

We saw a flight to safety with government bond yields rallying across the curve. Locally, 3yr yields rallied 57bps and 10yr yields rallied 49bps over the month. The portfolio’s interest rate exposure helped over the month. We see the risk of a central bank policy mistake as becoming a bigger issue over the course of this year. Thus, we expect to remain nimble over 2023 and adjust our interest rate positioning as such.


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