Beating inflation with investment-grade bonds

INVESTMENT-GRADE BONDS, i.e., bonds rated from ‘AAA’ to ‘BBB’, offer higher yields than bank fixed deposits (FD) of similar maturity profiles. Currently, they offer yields of up to 13% or even higher. Thus, the significant yield premium offered by corporate bonds can help investors earn higher inflation-adjusted returns.

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At present, the highest interest rate slabs offered by private sector banks, public sector banks and small savings schemes for non-senior citizens stand at 7.20%, 6.75% and 7.70%, respectively, while the small finance banks asa category offer the highest FD slab rate of 8.05%.

At present, the government bonds are issued at face value of ₹100 whereas corporate bonds issued through IPOs have face value of ₹1,000.As bulk of the corporate bond issuances in India are made through private placements, Securities and Exchange Board of India (Sebi) has reduced the minimum face value amount for corporate bonds issued through private placements to ₹10,000 to improve liquidity in the corporate bond market.