7.33% GS 2026 seems overpriced at 105.77

[sandepca]

Guys,

7.33% GS 2026 is currently up for auction. Price is 105.22 on face value of 100. The zerodha website says indicate yield of 7.2% on the 3 year bond. I do not need to sell the bond before maturity.

I don’t understand how the yield can be 7.2% if I buy it at 105.22. Isn’t it super expensive.

According to me the current yield would be like 6.9% and YTM would be like 5.2%

Am I incorrect? Does it make sense to invest in this G-sec at this price.

Regards,
Sandeep

[ndeshm]

I think what is being quoted is the “dirty price” of the bond plus some additional markup. For instance, here is the same bond on rbiretaildirect:

The dirty price is the price of the bond plus accrued interest.

Post auction, the excess amount the markup will be refunded.

[Akash_Shah]

Zerodha blocks higher amount. What you see is not the price

On what basis does Zerodha block money for the bids for G-secs?

This is discussed multiple time on this forum

GSec bonds highly overpriced

As this is auction, actual price is not known, and zerodha generally blocks slightly higher amount which is refunded back once actual price is known

[Neelesh]

We get the initial price that has to be blocked from the exchange, this is not something specific to zerodha but the general industry practice.

[sandepca]

Thank you very much

[sandepca]

Thanks