Whenever we recommend SDLs, our readers raise many queries like “Are SDLs safe?” and more about the difficulty of choosing them. In this FAQ, we try and address all of your niggling doubts about SDLs.
Indian debt investors have been handed a raw deal in the last three years. Though inflation has been rising and market interest rates edging up, the Reserve Bank of India (RBI) and the Monetary Policy Committee (MPC) were doing their level-best to keep a lid on interest rates, to protect borrowers in a Covid-hit economy.
Beginning now, we will be issuing recommendations on opportunities arising in primary government bond issues to Growth subscribers. These recommendations will be both central govt bonds (called G-Secs) and state development loans (SDLs) and if opportunities are attractive – treasury bills as well.
How to play the SDL bond opportunity?
It’s not an easy life for fixed income investors looking to earn decent yields today. With RBI regularly mopping up government securities through its G-SAP programme and also reining in yields on new issues, the 10-year government security has been caught in a range of 5.8 to 6.3 per cent for the last one year, despite elevated inflation.