How are G-Sec Bond based Mutual Fund giving 12% Returns?

Bonds
1

Hi

I recently came across HDFC NIFTY G-Sec Jun 2036 Index Fund Direct Fund that has given almost 12% returns in just one year.

When I checked their holding, they have 97% holding in Government securities @7.54%.

With this said, how is it possible, that it has given such high returns?

Is it because of premium as interest rate are planned to go down and hence they are charging premium if we want to buy this bond?

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2

long term gsecs have given remarkable returns this year. From Jan 2024 to Sept 2024, all gsecs having 15 or15+ years maturity have given more than 10% returns in 9 months. I had purchased 73GS2053 which has given 12% in 9 months.

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3

When yields come down (which has happened over the last few months), price of the bonds go up. So the 7.54 coupon is only one part of the returns that these gsec investments are enjoying. The other component is coming from the appreciation in the bond prices. The cumulative effect is the 12% returns you’re seeing.

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