Investment in sovereign-backed bonds: Be prepared for rate changes

You can invest as much as you like in these bonds, but they are subject to rate changes

Having withdrawn the 7.75 per cent Savings (Taxable) Bonds, the government has now announced the launch of Floating Rate Savings Bonds, 2020 (Taxable), which will become available from July 1. However, while the earlier bonds offered a rate of return that remained fixed for the entire tenor of seven years, the interest rate on these bonds (of similar tenor) will reset every six months. The current rate is 7.15 per cent. These bonds are benchmarked to the National Savings Certificate (NSC) and will pay 35 basis points more than the latter.

The appeal of these bonds comes from the fact