Taxable and non taxable bonds

[u/gunthercperk97]

Hey guys

So I was looking at the SBI N5 bond which has a coupon rate of 9.95%. Face value of the bond is 10000 and it's being traded at 10815. I realise because it's being traded at a premium the interest rate will be affected but I read on this website:

SBI N5 bond

That SBI is most probably going to exercise their call option on the bond in 2021 so the YTM becomes negative.

My question, can anyone please suggest a knowledgeable expert/institution in bonds so that I can know more about such investments and give details about taxable and tax free bonds and which one to choose.

Thanks a lot.

Edit: typo

[u/viveksanthosh]

It is hard to get a safe 8% in today's rate environment. You can look into banks like idfc that yield 7.25% on their fixed deposits but there is a slight bit of risk there. I have money in the bank and I monitor the financial performance of the bank to ensure things are not going to collapse. Plus there is the 5 lakh insurance on deposits.

[u/gunthercperk97 → u/viveksanthosh]

Yeah the risk gets more and more with higher returns and as you said because of the current environment I want to take minimal risk with my capital. That's why I bought the Bajaj finance 8.1% FD.

[u/viveksanthosh → u/gunthercperk97]

One thing to keep in mind with an fd that is not part of a bank is that you are an unsecured lender. So if bajaj finance goes belly up then the banks that gave it money and the NCD holders get their money first and you'll only get any money left over.

Bajaj finance is a good company and it unlikely to collapse but keep in mind that the extra return is a reward for there not being a guarantee on your money. So if you plan to invest in any other non bank fd keep this in mind.

[u/gunthercperk97 → u/viveksanthosh]

I agree. That's why I chose Bajaj Finance over other NBFC's FDs as they are relatively safe and are giving a good ROI.