G Sec maturity principle amount back ?

Hi , if I bought Gsec at the value of 103 , which has face value of 100.

When your Gsec maturity done , I got my principal amount back at the face value of 100 . So i did loose extra 3 ruppe ?

1 Like

Yes, that is the expected behaviour.

Upon maturity, the face-value of the bond (not the amount one invested) is credited to the one who was holding the bond.

NOTE: Please avoid duplicate posts.

@cvs : Your statement is correct for zero coupon bonds. However, the price of 103 for a bond of face value of 100 can happen for many reasons including pending coupon payments and change in yield. So its not always true that you will lose money as the 3 could be discounted coupon payments built into the price.

Yes Rs3 is capital loss. When you are calculating final yield you need to keep this also in mind to derive the gain/profit.

For a 754GS2036 which has an original yield of 7.54%, the 103 purchase will lower the final yield to 7.11%. For 10 lakhs the capital loss will be Rs29127

Well yes, technically it’s a capital loss but the right way to look at it should be that a 100 FV bond trading at a premium must mean that the coupon payments are higher than prevailing interest rates. So the Rs. 3 loss here is only notional since the holder will be enjoying a favourable coupon income throughout the bond tenure.

Nothing notional about it.
It is an actual capital-loss.

However, as you rightly pointed out,
any interest payments received on the GSEC can compensate for the loss.

Also, depending on overall time spent holding the bond, it might be a lucrative venture as well.
(eg. a capital loss of 3%, and an interest received 3.5% on a bond maturing in 2 weeks will net an income of ~12% p/a)

Oh, by notional I just meant it’s of no real significance (other than taxation pov arising from interest income, and a corresponding capital loss) and the only consideration which should go into making a purchase decision should be YTM and how does it compare with other virtually risk free instruments.

Any such opportunity, even if it presents itself, will not be available for long imo as arbitragers will run in to buy the bond, thereby pushing the price up to a point where the new YTM is similar to what’s prevailing in the market.

It’s a simple formula you shown here substract extra amount + it’s interest of that amount and you got your yield till maturity.

So bond will give same interest 7.11% annually, it will not fluctuate with price ?

Once you have purchased at a specific price - the yield does not change till maturity. If you sell it in between - the numbers will change.

1 Like

If I sell it in secondary market before half yearly interest credit .
Eg - took an exit at 4th month , so will I got 4 months interest or I hv to hold the Gsec till 6th month ?

The bond will give it’s coupon rate of interest on the face value the capital loss is notional coz you can sell it at a higher price than your entry price if there’s such demand and liquidity.
However the Market value of the bond will continue to fluctuate on it’s determinats.
You can watch this video by Abid @Sensibull for other clarifications.

1 Like

I used to think like that till a gentle man shared this link with me: Outstanding Government of India Securities (G-secs) and the interest payment dates

On the aforesaid dates you need to have the bonds in your demat for interest payments.

1 Like

Thanx alot for the link

Generally in the secondary markets the accrued interest in factored in therefore if you can take the exit in the 4th month at the right price you can get the accrued interest in the form of capital appreciation. But to get that directly to your bank account you need to hold the bond on the date of payment.

1 Like

As I see on NSE website 754GS2036 price is at 102.5 but on zerodha terminal is it 103.8 , is there any way i buy it 102.5 from NSE with good some good quantity? It’s almost 1.5 premium difference

103.92 is the ask price its common for all brokers in NSE

can you show where you saw 102.5 ?

It’s bid price on idbi samriddhi portal… can anyone get this price ?

Looks interesting, do you know how to transfer from IDBI to zerodha demat after purchase?

It’s bid price but on NSE actual price is 103.8 , no need to transfer from samriddhi , they direct came into your DP account , ifs bid gets the price , but i checked on portal hardly any seller at this bid price and quantity size is also less around 45k