10 Yrs Govt Bond Yield 6.8% Vs 10Yrs SBI Bank 5.5% FD – Which one to invest?

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Currently, the yield on the Government of India’s 10-year Gsec is 6.8 per cent. This is around 1.3 per cent higher than the SBI Bank FD rate for the same term. As a result, the natural issue that arises in our minds is which is better for us: 10 Years Govt Bond Yield 6.8 per cent vs 10 Yrs SBI Bank 5.5 per cent FD.

Let us examine the advantages and disadvantages of these goods in order to make more informed decisions.

Following the advent of RBI Retail Direct, many people are attempting to purchase direct Government of India bonds or some SDLs. The yield, especially in the case of SDLs, is over 7%. As a result, individuals will undoubtedly think better than normal nationalised bank FDs.

The game of investing in bank FDs, on the other hand, is not the same as investing directly in bonds.

Constant income

If you want a steady source of income until the bond matures and have opted not to sell during the bond period, this appears to be one of the better possibilities for you.

Because current FD rates are lower than the 10-year Gsec Bond yield, you should consider purchasing.


The issuer, as you are well aware, is the Government of India. As a result, there is no possibility of default or downgrade. As a result, if you are seeking the safest kind of investing, you can look into it.


The current yield is intended for current investors. Because these bonds are very sensitive to interest rate movements, volatility in the bond’s price is natural. As a result, the yield will fluctuate proportionately (Bond Price and Yields are inversely proportional). If you’re ready to deal with such turbulence, then proceed (especially if the plan is to sell before maturity).


Retail involvement is still low, and I’m not sure if you can sell in the secondary market as easily as you used to. Even if the RBI provides the internet platform through RBI Retail Direct, we must look at the participation and volumes traded here. As a result, the danger of liquidation is always present.


Taxation is an additional barrier with these bonds. The coupon (half-yearly interest) represents taxable income for you. In addition, if you try to sell it in the secondary market and there is a capital gain, that gain is taxed.

If your holding period is less than a year, the gain is taxed at your marginal tax rate. However, if you own the property for more than a year, you must pay a 10% tax (without indexation benefit). As a result, such bonds benefit people in the lower tax bracket rather than those in the higher tax bracket.

In conclusion

Just because the yield is higher than that of bank FDs or other debt alternatives does not mean we should acquire blindly. Such bonds are appropriate for those searching for a consistent stream of income and are willing to hold until maturity. Others searching for a larger yield should avoid it due to the volatility, liquidity, taxes, and reinvestment risk of the coupon they receive. As a result, such experiments should be avoided. Rather, stick to traditional bank FDs (if your requirement is less than 3 years), Money Market or Ultra Short Term Bond Funds (if your requirement is more than 3 years but less than 10 years), and PPF, EPF, SSY, and Gilt Constant Maturity Funds (if your requirement is more than 10 years).

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