Tax free bonds price increase; yields drop

Business

oi-Sneha

By Sneha B K

Published: Wednesday, April 18, 2012, 15:31 [IST]

Tax free bonds have seen their prices rallying, much before the RBI cut repo rates. Goodreturns.in had a look at the price movement of these bonds over the last seven days and studied how yield on these bonds have dropped in anticipation of the repo rate cut.

Housing and Urban Development Corporation (Hudco)
The HUDCO tax free bonds perhaps were offering the best yields until last week, when the 10 year bond suddenly saw a surge to the Rs 1000 levels, from its April 9 price of Rs 984.

The movement was largely in anticipation that the RBI would cut the repo rate. The coupon rates on these bonds are 8.1% for the 10 year.

The 15 year tax free HUDCO bond too has rallied like the 10 year bond and is trading at Rs 987.78, against last week's price of Rs 969.66.

REC (Rural Electrification Corporation)
The REC Tax Free Bonds were the last of the bond issues to have tapped the market in 2011-2012. The 10 year tax free bonds is trading at Rs 1,004 up 1.45 or 0.14% and 15 year bonds trading at Rs 998 up 1.25 or 0.13%.

Power Finance Corporations
The PFC bonds which came out with a public issue late last year are currently listed on the BSE .The 15 years bonds are trading at Rs 1,032, whereas last week it was trading at Rs 1,017.

The 10 year tax free bonds have also gradually moved up to Rs 1,030, as against last week's price of Rs 1021.88. The coupon rates on these bonds is 8.20% for the 10 year bonds and 8.30% for the 15 year bonds.

National Highway Authorities of India ( NHAI)
NHAI’s public issued tax-free non- convertible bonds of face value of Rs 1,000 each is in the nature of debentures having tax benefits under section 10(15) (iv) (h) of the Income-Tax Act, 1961.

The NHAI 10 year bonds were at Rs 1,037, last week trading at Rs 1,021. The 15 year bonds at Rs 1,041 whereas last week seen at 1,035.22