Bond Availability and Ytm

Bonds
1

Hi,
Bonds are fairly new to me,pls englighten me regarding queries below.

  1. Are t bills n government bonds available every week to invest in or it comes for investment infrequently as per rbi notice?

2.you get interest as per coupon rate on face value,right?if yes,then follow up question is that price at which we purchase it will effect annual interest rate ytm?,pls explain that with an example.
Assuming bond face value is 1000 coupon 7 purchase price 1010

And also please do not point to calculators, or bond formula as mentioned on various websites.
Need to understand what component is making yield variable.
Thanks.

2

You get interest always on the face value. So as per your example, you will get 7% on 1000…

Bonds are available in secondary market though the volume is not enough. Gsecs and Tbills are available weekly…

3

I dont see them listed this week on coin or am i doing something wrong?
Also then why ytm differs if we get 7% yield as per coupon rate acc. To example scenario mentioned in above post?

4

I have never used coin and u can raise a support ticket with Zerodha. But I can see bonds listed in kite… U can buy the bonds directly from there…

YTM is different because u end up paying a premium… Like in your example you are paying 1010 and not 1000…that eats in your yield

5

You can refer to the insightful Government Securities Module on varsity to understand the basics of the T bills and bonds. All your questions are answered there.
Do check Zerodha Coin site, if you are willing to invest.

6

@Sanjukumar.K i did give it a read,but unfortunately how ytm varies with time n calculated is not explained it
in detail.

@AJ007 yes,it eats up the yield but can we calculate how much its gonna eat up.

Also like in fd you know u get Simple Interest but if it is for than a year n u get maturity amount at end you get compounding effect.
Similarly in bonds if we invest 1 time ,is there any sorts of compounding effect coming to play…cuz all what i have learned for varsity is that you get half yearly interest on face value.
Am i missing something?

Thanks

7

Yes. You can calculate. You will need to list down all the interest payouts that u r expecting to get in the future in an excel sheet along with the date along with the initial investments and final payout. Then you can put the Xirr formula. Check the attached screenshot where I am calculating yield of a 8.2% coupon rate bond… received_909092936192900

8

In case of some bonds you do get cumulative interest at the end but many give you interest payouts periodically so no complex interest there… Simple interest…

1 Like
9

The Yield formula in Excel works out well in this last example of Interest only paid on Maturity cases I think…