Ask us anything about investing in government bonds, treasury bills (t-bills) and state development bonds (SDLs)

Bonds
103

@Bhuvan :- I have question about the bond market in general. Why is the bond market so fragmented and worse that retail is left out from participation. In liquidity perspective its a headache for retail to dispose off bonds.

I mean one there is CCIL where the lot size is way high only for big institutions to play around along with HNI and VHNI. There isn’t much liquidity in odd lots at all

Another market is NSE where RBI thinks bonds must rotate among retailer but no retailer wants to hold bonds for long time and hence illiquidity

My question why cant they bring one stop market like in CCIL maybe reduce lot size so that big institutions can sell/buy from retailers ? I know even RBI buys back bonds from CCIL, why cant they reduce lot size so that even retailers get the benefit?

104

The challenge with bonds is not the lot-size, that is solved already on BSE/NSE.
As is evident from NSE/BSE there is not much participation even with reduced lot-size.

The challenge is the sheer number of bonds.
Take the case of Govt. bonds itself.
There are more than 1500 Govt. bonds that offer the same level of sovereign guarantee
just with varying returns and maturity schedules.

IMHO, it is not possible for individuals to monitor that many number of bonds manually.
AFAIK, there aren’t any popular products
that allow individuals to express their interest in the bond market.

I think there is a need for a product
that enables an indvidual to say the following -

Hello other individuals on the exchange,
i have N Lacs and i will buy any bond in this list [A, B, C, …] you may sell
that mature anytime upto the next X years
at a rate such that i effectively receive atleast Y % (dividend + capital-gains)

Note: I end-up doing part of the above using a script that monitors Ask/Bids on NSE/BSE,
and manually placing bids using Limit orders whenever someone offers Govt. bonds on the exchange.

IIUC, the challenge in creating the above product is NOT the tech.
Rather, consider an user that has cash N lac,
how does one provide them a margin to simultaneously bid for (Delivery order) of N lac on 100-200 similar bonds,
with the assumption that the user is happy to purchase a total of N lac worth of any of these bonds.
(i.e. buy N lacs worth of any of the bonds on the user list that get offered for sale on the market first.)

Note, that it is important to not just enable the user to buy the bonds,
but, also important to publicly express their interest to buy certain bonds.
i.e. enable the user to simultaneously bid on each of the bonds in the market
so that any potential sellers of any of the bonds know that that there is interest in buying at a specific rate.

Another, subsequent challenge is the tight circuit-limits (5-10%) in exchanges around bonds
that prevent buyer-seller interested at trading bonds at a significant discount / premium.

105

This isn’t just in India but globally. Liquidity on the exchanges is almost nonexistent. Even in the US, there are numerous off-exchange venues and platforms like Tradeweb to solve this issue.

Lot sizes aren’t an issue, as @cvs mentioned. The minimum investment in Govt bonds is Rs 10,000. Plus, SEBI recently reduced the face value of privately placed corporate bonds to Rs 1 lakh from Rs 10 lakh. This may reduce further.

It’s the other way around. Since bonds, by their nature are meant to be held to maturity, I dont think expecting them to trade as actively as stocks is the right expectation.

This fragmentation is an issue. Today, all govt bonds trade on NDS, a platform run by RBI/CCIL. At the same time, all those bonds are also listed on NSE and BSE. So the same set of bonds are trading on two separate platforms. In an ideal world SEBI and RBI should work together to remove this framentation.

106

I placed an order for gsec on coin web, how will i pay for it? Does it get deducted from my balance on kite or do i need to pay coin seperately or directly from my bank account?

107

The investment amount for G-Secs will be debited from your trading account balance.

108

I have a question here. Commercial banks always are looking to buy bonds to maintain SLR, RBI buys bond from secondary market too. Is there a way retail can sell bonds to these big institutions,? This should solve liquidity issues. I am asking in CCIL market not off market

109

CCIL trade generally happens in lot size of 5Crs. Pretty tough for retailers to participate in that lot size.
There is an odd lot market for smaller size, but again there are too many complexities for average retailer to participate in it.

110

that exact lot only I was saying why they cant reduce it to minimum 10,000 . If CCIL reduces that then retail can easily participate in bond market

111

Hi , I see an error in SDL date and it is not listed today 3rd July and instead marked as 6th July, Can you correct this, I see right info at RBI press release data

112

Hi @Ashwin_Raj

As per the issuance calendar, July 4th is the auction date. The bids close one day prior to the auction date. (i.e., today)

SGLs
SGLs1259×739 76.6 KB

113

I had bought RBI bonds in Feb, but the interest is still not credited, usually credited around July 1st, any one else facing this same issue, do you know who to contact? Pls help, thanks!

@ShubhS9

114

Hi , if i bought Gsec at the price of 103 and bond face value is 100.
When it gets mature , will I got my 103 or 100 at the time of maturity?
If we got only 100 face value so I lost extra 3 rupee ?

115

Upon maturity, one will receive the amount equal to the face-value of the bond.
The amount may not be equal to the amount one initially paid to purchase the bond.
(eg. if purchased on the secondary markets like BSE/NSE at a premium/discount.)

116

I have a question, kindly clarify

Suppose I bought a Rs 100 bond in high interest environment and bonds are trading at 6% yield. Now after some time, interest rate changes such that bonds are trading at 3% yield. So will the bond be priced at 200 (ignoring the maturity principle) in secondary market to match the yield?

117

Interest will be credited within 15 days from the interest payment date. You can check interest payment dates for all bonds here: Interest payment dates for government bonds (G-Sec)

118

IIUC, you probably meant to say that new bonds are now being offerred at 3%.
( “traded” implies being sold and bought on the secondary markets. )

Yes.

Another possibility is that the previous bonds may not be traded on the secondary market at all.
Often happens when as the logical price ends-up being outside of the circuit-limits (-/+ 5% or -/+10%) of the LTP of the bond on the secondary market like NSE or BSE.

120

Continuing the discussion from Ask us anything about investing in government bonds, treasury bills (t-bills) and state development bonds (SDLs):

I WANT TO INVEST IN NHAI INVIT (NATIONAL HIGHWAY AUTHORITY INDIA) BONDS BUT HOW WHERE I DON’T KNOW ISSUE DATE HOW TO KNOW NEXT ISSUE DATE I WATCHED NITIN GADKARI’S INTERVIEW WHERE HE SAY ON EVERY 15 DAYS WE WILL ISSUE BONDS I DON’T UNDERSTAND THAT MUCH HELP MEE !! I AM BEGINNER IN THE MARKET AND LEARNING

121

Any specific reason you want to invest in only this specific bonds?

Yes, he said that, but it wasn’t followed, like so many other things which ministers promise and then forget about :slight_smile:

I would suggest, first understand what is your investment need and accordingly try to find a product which suits you.
Also, depending on your age, investing in bonds for 20 years or so at 8% may or may not be best decision, so think through it.

Just don’t get lured to a product because someone (in this case minister) said its great opportunity.

1 Like
122

@Bhuvan Are state psu bonds equally sovereign as GSecs or SDLs ? Ie what are the changes of default for State Psus?

123

Nope. There’s no explicit sovereign guarantee for PSUs.