Yields on Ten year GOI security bond has gone up by 25 basis points after Union Budget and RBI policy announcement (Yield and price are inversely related). There is a trust deficit among market participants, and they need more assurance from RBI and Finance Ministry. The inflation has started rising and planned budget deficit will be 6.80% of GDP for FY 2021-22. Bond market is expecting higher borrowing by RBI on behalf of Central & State Government. Thus all the AAA rated Central PSE or Private sector bond yields have gone up by 40-50 basis points.
|Security Name||Rating||IP Dates||Maturity Date||Face Value||YTM|
|7.15% PFC 2036 Secured||AAA By CRISIL & ICRA||22 Jan Annual||22-Jan-36||1000||7.19%|
|6.85% IRFC 2040||AAA By CRISIL & ICRA||15 Oct Annual||29-Oct-40||10 Lakhs||7.15%|
|6.94% NHAI 2036||AAA By CRISIL & ICRA||30 Dec Annual||30-Dec-36||10 Lakhs||7.11%|
|7.00% PFC 2031 Secured||AAA By CRISIL & ICRA||22 Jan Annual||22-Jan-31||1000||7.04%|
Tax Free Bonds are quoting at 3.80 – 4.40% depending upon the maturity of the security. The yield has remained at the same level, despite the spike in the yield of 10 year GOI Security. It is observed that the yield will harden as and when the banks starts offering higher rate on their Fixed Deposits. SBI and HDFC Banks are offering 4.50 – 6.00% rate on their FD’s. Thus Post Tax return works out to 3.48% for Ultra HNI investors who are into 42% Tax Bracket. As there are no new issuances announced in the Union Budget (2021-22), Tax Free Bonds are in demand among Ultra HNI investors.
|Security||Coupon||Interest Payment Date||Maturity||Offer (YTM)||Rating|
|IRFC TFB||8.35%||15th April Annual||27-Nov-23||3.80%||CRISIL AAA|
|NTPC TFB||8.41%||16th Dec Annual||16-Dec-23||3.80%||CRISIL AAA|
|NHAI TFB||8.30%||1st Oct Annual||25-Jan-27||4.40%||CRISIL AAA|
|IRFC TFB||8.10%||23rd Feb Annual||23-Feb-27||4.40%||CRISIL AAA|
|NHB TFB||8.93%||24th Mar Annual||24-Mar-29||4.40%||CRISIL AAA|
Retail investor who is into 0-30% Income Tax Bracket, it is prudent to invest in AAA rated Central PSE NCD’s or Private Sector Taxable Bonds.
Published on 24th Feb 2021