Oct 2020 Economic Times
These bonds are a good fit for investors who want to buy and hold till maturity.
These bonds are a good fit for investors who want to buy and hold till maturity.
Over the long-run, gilt funds have delivered returns. These funds have given more or less comparable returns vis-à-vis other duration products.
Wealthy investors are breaking their low yielding fixed deposits in banks to invest in bank perpetual bonds, which earn about 150-200 basis points higher interst rates at the cost of higher risk.
Chasing historical return is risky and the investors of recently launched Bharat Bond Exchange Traded Fund (ETF) are also realising this.
To be sure, banks have reduced their fixed deposits (FD) rates due to increased inflows and lack of safe lending opportunities.
Savers in lower tax brackets are set to benefit from a new set of sovereign debt papers being offered from next month, with the central bank selling the floating-rate securities linked to National Savings Certificates for the first time to individuals and Hindu Undivided Families (HUFs).
Investors come into MFs so that they can exit according to their cash-flow requirements. Except for triple A-rated papers, liquidity for lower-rated papers has been limited. Investors want to stick with larger-sized schemes, where liquidity is expected to be well-managed.
Market had discounted rating downgrade (one notch) by Moody’s. “Excess liquidity in the system is driving the bond yields.
It makes sense for a retail investor at higher tax brackets to subscribe to Bharat ETF units. Wealthy investors have now turned risk-averse amid economic uncertainties. They now prefer secured returns to astronomical returns.
Many investors have shied away from the equity markets. With investable money, they are seeking 7.75 per cent RBI Saving (Taxable) Bonds. Since the instrument is a fixed deposit, is not tradable in the secondary market. But the instrument could be a steady long-term source of interest income.