Invesco Bond Income Plus in demand – should you buy?

With interest rates dropping, the Invesco Bond Income Plus trust should offer a smooth ride to lock in higher levels of income. Plus, it boasts an excellent record

Percentage Sign On Top Of Coin Stacks Before Blue Financial Graph - stock photo
(Image credit: Getty Images)

As interest rates start to fall, many risk-averse investors will be looking to lock in higher levels of income. But yields on longer-dated government bonds are already not much more than 4%, and on higher-quality corporate bonds they are scarcely higher. The yields on funds in the debt, loans and bonds investment-trust sector are significantly higher, with several of them exceeding 10%, but these may carry obscure risks, particularly for those specialising in the mystical world of collateralised loans

The Invesco Bond Income Plus (LSE: BIPS) trust yields a lower but still healthy 6.7% from a “very liquid” portfolio of listed bonds. Thanks to an average bond price of 92 and a weighted average bond maturity of 6.6 years, the redemption yield of the portfolio is 8%, which rises to 9% with the benefit of borrowings amounting to 14% of net assets. This is achieved through “repo” borrowing against individual bond holdings at an effective interest rate of around 4%. 

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.