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SBI Bond Yield Calculator

SBI’s four bonds listed today. First question: Why are there four bonds? Well, each of the two types – 10 and 15 years – had two options: for retail (individuals, 5 lakhs or less) and the rest.

Also see: “SBI Will Sell Bonds at 9.95%


How do you work this sheet?

Interest Payment: The coupon rate that is paid out every year. It’s on the face value of Rs. 10,000 – so 9.75% means Rs. 975 per bond per year, regardless of the current market price of the bond.

Redemption Date: If everything works out and SBI doesn’t go bankrupt or something, you will get Rs. 10,000 (the face value) back on this date.

Current Price: What the bond is currently trading at in the market.

Call Option: SBI retains the right to, after a while, call back the banks and tell you, “Listen, here’s your Rs. 10,000 per bond and Rs. X as accrued interest. We redeem these bonds”. For some bonds the “call option” is after 5 years, for others its after 10.

Embedded Interest: SBI bonds pay out interest once a year (record date is usually 17th of March every year) So as the days go by, the interest gets added up – the Rs. 975 per year in the above example is about Rs. 3 per day. The subsequent calculation of the yield needs to remove the accrued interest, which is part of the price. (This is also why you will see the price DROP by Rs. 975 or so every March 16 for that bond).

(Thanks to @lukkha for pointing me to this article that confirms we have to reduce the accrued interest)

Yield: I’ve split this into two parts.

SBI Takes Call: Means that on the call date, SBI returns you the money. They will only do this if the market rate of interest is less than the coupon rate – I’d assume they will exercise the call option only if rates go below 9% for them. What you see in this row is the return if SBI decides to exit early.

SBI doesn’t: Let’s say interest rates are higher than 9-10% and SBI decides to carry on. You get a longer period of holding, so your yield changes.

Yield is simply what you make as a return, expressed in a way that is understandable as a compound interest return over time.

Cut out the bullshit

If you’re thinking – dude, get to the point, did I make money or not? Well, if you bought in the IPO you probably got about Rs. 50 per bond as interest till now. You’ll get another 15 days of interest after April 2, which is another Rs. 42. (even if you sell the bond today) That’s interest of about Rs. 90.

Look at the prices: Three bonds are quoting at a loss (less than 10,000). There, you’ve lost money, but if you include the interest you are still okay.

But then, if you consider that you could have put the money in the bank, which could have gotten you some interest, and adjust for that, you might still have lost money. But since this is “cut out the bullshit” mode, I won’t go into that.

The N5 bond – the 9.95% retail bond – appears to be doing the best, in terms of yield it’s actually the N4 bond that’s done well. The best buy remains the N3 bond.

Remember, they’re all SBI, and the difference between 10 years and 15 years to most people is “way too far away to bother”. So the rates should be fairly close by – to give you an equivalent example, the 10 year Indian bond (okay, 11 year) is trading around 8.08% while the 15 year bond is at 8.34% – the difference is a narrow 0.26%.

Will I buy this? Er…no. I’m getting fairly good returns, post tax, through debt mutual funds for my debt exposure. All interest is fully taxable, which post tax is a return of 7% or less; I get a far better deal on short term debt funds which are giving me around 8% post tax (if I hold). The risk remains that interest rates will fall – but honestly, I don’t expect that to happen.

Also see: A 9 minute Video on the Concept of Bond Yields, as a MarketVision Short Take, recorded by me.


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  • abhikush says:

    >Which short term bonds have you invested in? Value Research Debt: Short Term category have average returns of only 5.28%.

  • Deepak Shenoy says:


    They are called the "ultra short term" funds. They'll probably lose sheen when interest rates settle down, but I expect that rates will go further up.

  • abhikush says:

    >Short term bonds should have low sensitivity to interest rates. Why do you expect them to loose when interest rates stabilize? Also, in rising interest rate environment wouldn't Bond Prices go down? So, isn't that a negative for Bond Funds (granted Short Term Bonds would not be as severely impacted as Long Term)

  • Deepak Shenoy says:

    >At the ultra short term end (180 days or lesser) credit revolves, so while you don't lose too much when interest rates go up, the next cycle of purchases, as bonds mature, will yield lesser.

    basically you should be at the ultra short end when interest rates are going up, and at the long end when rates are coming down. My view continues to be that rates will go further up.