Dec 2022 Moneycontrol
The expectation of the interest rate cycle peaking can be a good entry point into long-duration products including gilt funds.
The expectation of the interest rate cycle peaking can be a good entry point into long-duration products including gilt funds.
“Yields on tax-free bonds have not risen in the same proportion as interest rates”.
“Just keep in mind that tax-free bonds give you a regular income, but Bharat Bond ETF gives you everything at the end,”.
Visible returns, high quality portfolios, attractive yields, low expense ratio and liquidity are attracting investors to target maturity funds.
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,”.