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Coupon Rate:
This is the rate of interest that will be paid to you on a periodic basis. For example, if face value of a bond is Rs 1,000 and the coupon rate is 8%, then you will get Rs 80 as interest every year.

Frequency Of Coupon Payments:
This refers to the intervals at which coupon payments will be made e.g. half yearly, annual etc.

Redemption Date:
This refers to the date when the bond will mature. You will get the face value of the bond, along with accrued interest (if any) on the redemption date.

Accrued Interest:
Accrued interest is the interest accrued by the seller from the last coupon payment date till the date on which the bond is sold. Since the buyer will get the full year's interest on the next coupon date, the accrued interest is included in the bond's quoted price. The bond's price including the accrued interest is known as the dirty price. The clean price of the bond = Dirty price - accrued interest.

Yield To Maturity:
YTM of a fixed income instrument is the return on investment (assuming interest payments are re-invested at the same rate) if you hold the instrument till its maturity. When calculating yields, both interest payments (coupons) and principal payment (face value) on maturity must be taken into consideration. Higher the YTM, higher the returns. YTM.

Duration:
Duration refers to the interest rate risk of a bond. There are two types of durations - Macaulay Duration and Modified Duration. Macaulay and Modified Durations are closely related. Macaulay duration is the weighted average term to maturity of the cash flows from a fixed income security. In simplistic terms, Macaulay Duration is the weighted average number of years an investor must maintain a position in a fixed income instrument until the present value of the fixed income instrument's cash flows equals the amount paid for the instrument. Duration and maturity are related - longer the maturity, longer is the duration. It is important for you to know that duration is directly related to the interest rate sensitivity of a bond. Higher the duration, higher is the bond's sensitivity to interest changes. Modified duration is simply the percentage change in price due to the percentage change in interest rate.

Bond Rating: Bonds are rated by credit rating agencies like CRISIL and ICRA. Higher the credit rating lower is the credit risk. You should know that bo nds with lower ratings will have higher YTMs but the risk is also higher. You should make informed investment decisions.

Sovereign Gold Bonds (SGBs):
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India..

The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long terms capital gains arising to any person on transfer of bond.

Government Securities (G-Secs):
A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

Besides providing a return in the form of coupons (interest), G-Secs offer the maximum safety as they carry the Sovereign’s commitment for payment of interest and repayment of principal

Non Convertible Debentures (NCDs):
Non-convertible debentures (NCD) are fixed-income instruments, usually issued by high-rated companies in the form of a public issue to accumulate long-term capital appreciation. They offer relatively higher interest rates when compared to convertible debentures.

Non-convertible debentures fall under the debt category. They cannot be converted into equity or stocks. NCDs have a fixed maturity date and the interest can be paid along with the principal amount either monthly, quarterly, or annually depending on the fixed tenure specified. They benefit investors with their supreme returns, liquidity, low risk and tax benefits when compared to that of convertible debentures.

Example of NCDs: You can invest when the company announces NCDs or purchase after it trades on the secondary market. You must check the company’s credit rating, issuer credibility and the coupon rate of the NCD. It would help if you purchase NCDs of a higher rating such as AAA+ or AA+.

RBI Bond-Floating Rate Savings Bonds 2020 (Taxable):
The Government of India launched the Floating Rate Savings Bonds, 2020 (Taxable) scheme on July 01, 2020 to enable Resident Indians/HUF to invest in a taxable bond, without any monetary ceiling. The investment tenure of these Bonds are 7 years. The interest is paid semi annually on 1st January and 1st July. The current coupon rate is 7.15% and the coupon/interest of the Bond is reset half yearly based on National Savings Certificate (NSC) rate (Base rate + 35bps)

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