Bond Baba is a happy Baba today, thanks to Shriram Transport Finance. Some of you will remember the awesome 12% yield that appeared in these bonds in July this year. (Click here for our post then)
Yesterday, those bonds matured. And Bond Baba has noted that many of you have received the bond proceeds bang on time. SRTRANSFIN is a very punctual company. And today, the note-ban doesn’t matter because the money comes straight back to your bank account.
To recap, the bond was purchased at Rs. 1920 on 26 July returned Rs. 2000 today, as a capital gain, where the company bought it back at a premium. The return is Rs. 80 on an investment of Rs. 1920, or 80/1920 = 4.17%. This is for 128 days, so the annualized profit was 11.88%.
In the previous post we spoke of fixed income giving an average return of about 9%. If you had Rs. 100,000 then you would make Rs. 4170 in this bond. Then you would need, in the rest of the year (8 months), just Rs. 4840 to make a 9% return for the overall capital – around 7.5%, which is available in many other instruments now, or in ultra-short-term mutual funds.
The bond situation looks weak right now as market participants don’t seem to be keen to sell much. So we just would stay away from listed bonds until liquidity is back. There’s an SBI 9 year bond yielding 8%+ if you don’t mind locking money in till 2025. (SBIN-N2).
While this is a placeholder note, it is useful to target such opportunities as they are visible. Today there may not be many out there, but we notice often when something juicy comes along, and post in #bonds-and-funds on Slack.