SGBAUG 24 - 4900
SGBAUG28 - 4800
SGBAUG29 - 4660
Basically the trend is decreasing. But, why it is so ?
I’m guessing it’s because the near term bonds can be redeemed for the prevailing gold price, whereas the longer term bonds are just that - bonds and not gold. Even gold ETFs can be redeemed for gold if you have a large number of units, so they have to track the price of gold properly.
Truth be told, I have tried buying SGB hoping for a convergence in price but that never happened. It’s likely going to stay this way.
1 Like
Thank you.
Can it be because of the fact that market feels that in long term gold will not be that high ?
Like in crude also, long term future contract prices(Nov, Dec) are low compare to Jun ones as people feel crude will eventually come low.
In near term bond there is greater interest and hence greater liquidity. Also for 2024 maturity, 5 years have already passed and option of redeeming it with RBI is also open. Hence they tend to trade nearer to gold prices.
Longer duration bonds hardly have any liquidity and very few trade occurs. It is buyer’s market and prices are depressed.
But do not use this to predict long term gold price trend in future. That has not relation with SGB prices.
1 Like
Actually, some of the longer dated bonds, particularly the SGBAUG28V is very liquid, more so than the near term ones.
Vagar is right, the price trend in SGBs is a declining one when plotted against the expiration dates.
1 Like
You’re right, longer term crude oil futures are in backwardation. There could be many reasons behind it, one of which could be producer hedging. The oil producers like to lock in a price today so that they don’t have to deal with the volatility.
1 Like