Applying a credit risk filter
You might be concerned with being over-exposed to any single bond issuer (too much credit risk). If so, as a basic filter continue to sort by YTM, but then select only 1 XTB per bond issuer in your portfolio.
XTBs filtered by credit risk (highest to lowest)
|ASX CODE||UNDERLYING BOND ISSUER||MATURITY DATE||COUPON TYPE||COUPON P.A.||INDICATIVE YIELD*|
|YTMAWC||Alumina||19 NOV 2019||FIXED||5.50%||4.881%|
|YTMDO1||Downer||11 MAR 2022||FIXED||4.50%||4.044%|
|YTMQF3||Qantas||19 MAY 2022||FIXED||7.75%||3.884%|
|YTMAZJ||Aurizon||28 OCT 2022||FIXED||5.75%||3.856%|
|YTMLL1||Lend Lease||13 MAY 2020||FIXED||6.00%||3.602%|
|YTMAST||Ausnet||28 JUN 2022||FIXED||5.75%||3.247%|
|YTMAGL||AGL Energy||05 NOV 2021||FIXED||5.00%||3.205%|
|YTMAPA||APA Group||22 JUL 2020||FIXED||7.75%||3.195%|
* Data as at 06 JUL 2016
This would remove 2 of the 3 Qantas XTBs, and 1 of the 2 Downer XTBs.
Result = A portfolio with 8 XTBs with a 3.74%* YTM on the date this data was taken.
Other ways to narrow your selection
There are a number of other filters you may use to narrow your selection. Some of these include: