# Why are SGBs trading below their intrinsic value?
**URL:** https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250
**Category:** Bonds
**Created:** [April 15, 2025, 4:13am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250 "2025-04-15T04:13:41Z")
**Posts on this page:** 14
**Page:** 1
### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [April 15, 2025, 4:13am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/1 "2025-04-15T04:13:41Z")
[NSE market watch shows most SGBs trading near 9000 or less](https://www.nseindia.com/market-data/sovereign-gold-bond). But, the [ibjarates for 999 purity](https://ibjarates.com/) to which SGBs are linked shows it’s intrinsic value as 9300+ today. Given the pending interest, shouldn’t it trade higher?
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### Author:  [@nithin\_kumrr](https://tradingqna.com/u/nithin_kumrr)
#### Post date: [April 15, 2025, 8:18am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/2 "2025-04-15T08:18:50Z")
> [@BB789](#):
>
> Given the pending interest, shouldn’t it trade higher?
Maybe due to the demand/supply and liquidity.
@cvs, any thoughts?
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [April 15, 2025, 8:32am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/3 "2025-04-15T08:32:06Z")
Unlikely. Liquidity issues were always there. In spite of that, It used to trade above ibja rates by 10-20%. See
> **[Why are Sovereign Gold Bonds trading at 5-12% premium?](https://www.moneycontrol.com/news/business/personal-finance/why-are-sovereign-gold-bonds-trading-at-5-12-premium-12798000.html)**
>
> Sovereign gold bonds are trading above the reference rate, due to their tax advantage and coupon rate. But with news of lesser or no future issuances, listed SGBs are becoming even more popular.
> **[Why buying Sovereign Gold Bonds in secondary markets may not be a good idea](https://www.moneycontrol.com/news/business/personal-finance/why-buying-sovereign-gold-bonds-at-a-premium-in-secondary-markets-may-not-be-a-good-idea-12850157.html)**
>
> While experts are optimistic about gold’s outlook, buying Sovereign Gold Bonds at a premium to the reference rate could result in a capital loss if prices do not appreciate enough to offset the premium being quoted currently.
Maybe bond market doesn’t believe the government to pay up or expect customs to reduce more or just expect Gold to fall? Something doesn’t add up here.
> [@SGB pricing in Secondary market](https://tradingqna.com/t/sgb-pricing-in-secondary-market/171458):
>
> The LTP for SGBFEB32IV is currently trading around 7912/gram but the current market price of GOLD is ~6894. So why is it trading at such a high premium? Also given that it was issued at a face value of 6263 i.e. I am getting Interest on only 6263 instead of CMP, so the SG bond should trade lower than the CMP ( ignoring any accrued interest for the last 6 months)? In some places, I found that to find the fair value of SGB we need to ADD “All the future interest payments in present value”. Does…
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### Author:  [@tallerballer](https://tradingqna.com/u/tallerballer)
#### Post date: [April 15, 2025, 9:25am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/4 "2025-04-15T09:25:31Z")
> [@BB789](#):
>
> Given the pending interest, shouldn’t it trade higher?
Pending interest is on issue price not current price, so it’s not as big as it seems
> [@BB789](#):
>
> Maybe bond market doesn’t believe the government to pay up.
More likely that they expect it to fall before maturity. Plus SGBs always play catch up (in movement), it is not instant due to low liquidity. The prices you see are sometimes yesterday’s or way older since no trades took place for that SGB since then
And they are not trading that low as per my calculations. 2% premium is normal. I’ve been monitoring since months and all long term SGBs were at 1-2% premium. Same today.
Near maturity SGBs always trade at high XIRRs due to being only a few days away from maturity, which inflates XIRR
Disc: Calculations are done programmatically by me and could be wrong. XIRR is calculated inclusive of interest
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [April 15, 2025, 9:40am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/5 "2025-04-15T09:40:11Z")
No SGB is trading at premium. Which SGB is trading at 2% premium? They’re at minimum at 6% discount.
> **[SGB Analyzer - Track, Compare & Calculate Sovereign Gold Bond Prices](https://sgbanalyzer.com/)**
>
> Track Sovereign Gold Bond prices, calculate returns, and analyze SGB discounts with India's leading SGB analyzer. Compare SGBs and make informed investment decisions.
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### Author:  [@tallerballer](https://tradingqna.com/u/tallerballer)
#### Post date: [April 15, 2025, 9:48am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/6 "2025-04-15T09:48:45Z")
I’m talking about yield. You’re talking about price discount with gold. The site you linked is showing many SGBs at 2-3% yield.
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### Author:  [@asen](https://tradingqna.com/u/asen)
#### Post date: [April 15, 2025, 10:48am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/7 "2025-04-15T10:48:28Z")
> [@BB789](#):
>
> market doesn’t believe the government to pay up or expect customs to reduce more
Lol, I feel the same. Maybe some new taxation news on cg on the horizon 😵💫
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [April 16, 2025, 12:46am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/8 "2025-04-16T00:46:38Z")
Ok. Why are they trading at a discount in their price then, when they used to trade at a premium?
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### Author:  [@abhiwin123](https://tradingqna.com/u/abhiwin123)
#### Post date: [April 16, 2025, 5:30am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/9 "2025-04-16T05:30:54Z")
> [@BB789](#):
>
> Why are they trading at a discount in their price then, when they used to trade at a premium?
Well, I kind of see the possible reason - but I am not completely sure about it. On July 23, 2024 the budget presented slashed customs duty on gold and silver from 15% to 6%. That is 9% hit. That implies that the secondary market for SGBs were always pricing in this 15% on top of gold price till July 23, 2024.
> **[Gold and silver to become cheaper, customs duty cut to 6% - The Economic Times](https://economictimes.indiatimes.com/wealth/invest/gold-and-silver-to-become-cheaper-customs-duty-cut-to-6/articleshow/111947617.cms?from=mdr)**
>
> Union Budget 2024: Finance minister Nirmala Sitharaman cut customs duty on gold and silver to 6% in Budget 2024 today. "To enhance domestic value addition in gold and precious metal jewellery in the country, I propose to reduce customs duties on gold...
And if this is true, SGBs are still pricing in additional 6%. And there was chatter that it can be further cut by 3%.
> **[Budget 2025: Experts expect gold import duty to be cut by 3%, seek tax...](https://www.moneycontrol.com/budget/budget-2025-experts-expect-gold-import-duty-to-be-cut-by-3-seek-tax-reforms-article-12922614.html)**
>
> The industry has also called for measures to make the gold monetisation scheme, introduced in 2015, more attractive to encourage people to monetise vast household reserves
We already know that government is struggling to pay the bills on this one. Its a bond so government has to stick to its promise to pay interest and gold price on redemption but perhaps they will find a way to reduce their burden. And I guess that is what secondary market (being smart enough) is pricing in the discount of SGBs.
SGB Premium - Till July 23, 2024 - 32% Latest SGB Vs 19% GOLDBEES
SGB Discount - From July 23, 2024 - 15% Latest SGB Vs 31% GOLDBEES
P.S. This is really sad for SGB holders. I am also struggling to find an alternative of SGBs that can give true gold returns and can be collateralised as cash component of the margin made available.
P.S. This is only one possible reason. But it still doesn’t explain the huge divergence. Though it started from Jan 2025 when this money control report of further cut came in. But still, there has to be something in the way bonds are being treated and I would love someone knowledgeable to give a cogent explanation.
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### Author:  [@tallerballer](https://tradingqna.com/u/tallerballer)
#### Post date: [April 16, 2025, 5:53pm UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/10 "2025-04-16T17:53:32Z")
> [@abhiwin123](#):
>
> That implies that the secondary market for SGBs were always pricing in this 15% on top of gold price till July 23, 2025
Import duties were on top of price of gold. It’s not specific to SGB.
IBJA rates and market rates of gold also fell when import duty was slashed?
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### Author:  [@abhiwin123](https://tradingqna.com/u/abhiwin123)
#### Post date: [April 18, 2025, 4:24am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/11 "2025-04-18T04:24:48Z")
> [@tallerballer](#):
>
> Import duties were on top of price of gold. It’s not specific to SGB.
True that. It should have affected all Indian rupee denominated products uniformly - and not just on that day but there on as well.
But then something changed in the sentiment for SGBs on 23-Jul-2024 and 01-Jan-2025 which is around news of import duty slashing or rumours of further slashing. And from that point on they (SGB) had clear divergence in their pricing compared to GOLDBEES. When both should have uniform effect of IBJA prices.
SGB Premium - From Listing To 23-Jul-2024
SGB In Tandem - From 23-Jul-2024 To 01-Jan-2025
SGB Discount - From 01-Jan-2025 Till Date
As I said, this is conjecture and one possible explanation. I am not sure about it. And I would love to hear alternate explanation for these divergence periods.
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [June 7, 2025, 6:46pm UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/12 "2025-06-07T18:46:12Z")
For whatever reason, SGBs are closing/closed their intrinsic discount very fast the last few sessions. It’s trading near their intrinsic value. It’s possible we might have a premium soon. Something to watch for.
@tallerballer @asen
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### Author:  [@abhiwin123](https://tradingqna.com/u/abhiwin123)
#### Post date: [June 11, 2025, 4:04am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/13 "2025-06-11T04:04:20Z")
Yeah. I think it has some kind of yearly cycle of in-sync, divergence and convergence when compared to GOLDBEES. We considered all the news, IBJA prices, import export slashing hike, exchange prices, dollar denomination, etc. but seems the premature window of RBI has a big role to play giving downward pressure on SGBs. It just starts diverging (in SGBs favor) after the window closes i.e. exactly around April/May.
Anyhow, I ain’t complaining anymore … 🙂
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [October 24, 2025, 5:49am UTC](https://tradingqna.com/t/why-are-sgbs-trading-below-their-intrinsic-value/181250/14 "2025-10-24T05:49:13Z")
SGB back in discount territory.
Btw, what software is shown in your screenshot?