Oct 2022 Moneycontrol
NHAI has very long-term projects and it wants to make sure that it doesn’t default on payments.
NHAI has very long-term projects and it wants to make sure that it doesn’t default on payments.
The spreads between higher maturity papers beyond 10-years is not as wide as they should be. “These are good products, but investors can wait as spreads might widen, and then invest to lock-in at even higher yields,”.
“STRIPS offer about 100-150 basis points more than bank deposits and offer high safety and there is no reinvestment risk,”.
However, the experts warn retail investors against such adventures. “Do not jump into long term bonds or long duration debt funds assuming the rate hike cycle has ended.
For High Net Worth Individuals, I will suggest Tax free bonds and Target maturity Plans (Bharat Bond ETF etc). Tax Free bonds will fetch 5.5 per cent to 5.55 per cent returns in Bharat Bond ETF will give 7.25%.
“High safety, no put call option and opportunity to earn higher post-tax returns than bank deposits are drawing investors to these bonds,”.
“Mumbai: Rising inflation is seeing investors ducking from the storm in equities market to safe haven fixed-income investments and they prefer longer-dated perpetual bonds sold by state-owned banks with higher yield than similar maturity government securities and popular mutual funds”.
“Government bonds carry sovereign ratings, there is no credit risk, high liquidity and returns are higher than traditional small-savings products and bank deposits”.
Mumbai: Affluent investors allocating money to fixed income instruments are increasingly buying government securities(Gsecs) over AAA-rated public sector undertaking(PSU) bonds and state development loans(SDL), as the difference in returns has narrowed down and is at a historical low.
“We have never seen such narrow spreads between Gsecs and AAA-rated PSU bonds or SDLs. We are seeing a huge demand for Gsecs from rich investors since they are available in longer tenures, carry the highest safety and are more liquid,” said Vikram Dalal, MD, SynergeeCapital.
“Rich investors are showing interest in government papers maturing in 2045, 2050 and 2060,”. “Many HNIs want a regular income for their next generation with no credit risk or put/call option.