Buying Govt Bonds at the present juncture

Bonds
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Will buying Govt Bonds now and offloading them after 2024 elections would fetch good gains?

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Hmmm… :thinking: What is the thought process behind this?
What factors are you considering?

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Main is that interest rates might come down after elections.

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Also like now 10 yr bond interests are low compared to the 3 month / 2 year which lead to fall of bond prices of the long term ones…maybe if FED doesn’t hike interest rates further then it is the best time to buy government bonds… the long term ones

We will have two benefits,

  1. If FED cut rates, then the now long term bonds price will increase…i am talking about 30-40% types as 1-2% interest rate cuts can have a great impact on the long term bonds.

  2. There is some thing called Yield Curve Inversion which can be good indicator of a recession and currently…I has been 12-13 months since inverted…during the past decades it has signalled 8 times meaning the yield curved inverted 8 times and all the 8 times it was followed by a recession, Incase of recession the bond prices will go even higher as everyone would rushing to towards them for a safer option.

I mean its all just deman and supply…I have got to know all this about now…but i am ubale to convince my father to pull out money market move towards gsecs :frowning:

lets see how it turns out…

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Thanks for the information :+1: What is your source about the 30-40% gain if interest rates fall 1-2%?

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Might not happen immediately after election but eventually it should happen looking at the overall downwards trajectory since the last few decades… No govt wants to pay high interest on it’s Debt…

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Is there any blog available wrt gsec bidding in zerodha.

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Search gsec in this forum only a very detailed post is available

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If interest rates were to fall, the value of a bond with a longer duration would rise more than a bond with a shorter duration . if interest rates were to fall by 1%, the 10-year bond with a duration of just under 9 years would rise in value by approximately 9%.

As of December 13, 2023, Fed rate, was 5.25%–5.5%. And SVB went down when Fed rates were 3.4% types, it’s possible to see a 30-40 % gain in the price but I think its more possible if Fed cuts aggresively and if it is coupled with recession then its even more realistic.

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Thanks!! Can you pls quote the source like the article or video etc where you found this info…
.

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Below is a link to a workshop cunducted by Abid on Government Bonds, please go through the video for a clear understanding otherwise the link is with exact timestamps where he mentions (also calculated in the previos sections of that video) about 0.03 % change in interest can have 0.5 % change in long term GSEC’s ltp (in this case it was a 2060 GSEC).

My understanding comes from, current Fed rates at 5.25 - 5.5 %…ltp of longterm bonds are well below their par value (face value which is 100) as low as 90 (662GS2051 is at 90.1 as of today) and when interest come down to their normal levels… ltp of these bonds would rise and might go as high as 120 (1018GS2026 is at 121.31 as of today), again go through the video you will get a better picture.

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Thanks for sharing!! So now what’s stopping you from doing this? :wink: