Zebu blog

Category: Bonds

  • Gold vs. Bonds: A Choice Between Comfort and Control

    When markets get rocky, investors don’t look for the most “profitable” asset—they look for the one that feels safe. In India, that usually comes down to two familiar names: gold and bonds.

    At first glance, they may seem like alternatives. But dig a little deeper, and you’ll realize—they speak to very different instincts. One is emotional. The other, structural. One shines in chaos. The other builds calm. At Zebu, we talk to thousands of investors across the country. And when volatility strikes, the most common question we hear is: “Where should I park my money now?“

    Let’s unpack the real difference between these two pillars of Indian investing—and what makes each one powerful in its own right.

    Gold: The Emotional Armor

    Gold in India isn’t just an asset. It’s woven into culture, rituals, even memories. But there’s more to its financial appeal:

    • You can touch and store it. That physical presence brings comfort.
    • It’s not tied to governments or institutions. No default risk, no counterparty stress.
    • It often rises when markets fall—a psychological hedge when panic sets in.

    But it has trade-offs too:

    • It doesn’t earn you any interest.
    • Costs like GST, making charges, and spreads eat into returns.
    • And physical storage has risks of its own.

    Still, for many, gold is less about return and more about reassurance.

    Bonds: The Blueprint for Stability

    Bonds don’t sparkle. But they offer something gold doesn’t—structure.

    • Regular interest income
    • Defined timelines and maturity
    • Predictable cash flow

    If gold feels like a safety net, bonds feel like a foundation. Especially when you’re planning for life goals—education, retirement, or just steady income. Of course, bonds aren’t without risk:

    • Rising interest rates reduce bond prices.
    • Some carry credit risk—especially corporate ones.
    • And they can underperform inflation if held short-term.

    But used smartly, bonds can stabilize a portfolio like little else.

    So Which One Wins?

    That depends on what you value.

    • If you want to guard against uncertainty and inflation—gold has your back.
    • If you’re building a plan around cash flow and capital preservation—bonds are your ally.
    • If you want both emotional comfort and logical structure? Use both.

    Many of our users at Zebu layer them. Bonds form the ground. Gold gives the cushion. They’re not rivals. They’re teammates.

    Use Tools, Not Gut Alone

    Modern investing platforms—ours included—offer tools to help you decide.

    • Risk profiling
    • Asset simulators
    • SIP planning in Gold ETFs and Bond Funds
    • Diversification models

    These aren’t just for advanced traders. They’re built so anyone can invest with clarity—not guesswork.

    Final Word: Safety Is Personal

    For some, safety looks like a locker of gold coins. For others, it’s a bond ladder maturing every year. For you, it might be both.

    Whatever you choose, make sure it suits your life, not just the markets.

    Because in the end, your peace of mind is the real return.

    Disclaimer

    This blog does not provide investment advice; it is merely meant to be informative. Zebu disclaims all liability for financial decisions based on this content and makes no guarantees regarding accuracy or returns. A certified financial advisor should always be consulted before making an investment.

    FAQs

    1. Is it better to invest in gold or bonds?

      Gold vs gold bond depends on your goals. Physical gold offers liquidity and hedge against inflation, while bonds provide regular interest and more predictable returns.

    2. What are the risks of investing in bonds?

      Bonds, including sovereign gold bond vs digital gold options, carry risks like interest rate changes, credit risk, and inflation eroding returns.

    3. What are the disadvantages of buying gold bonds?

      Gold bonds may have lower liquidity than physical gold and limited flexibility if you need quick cash.

    4. Can I invest in both gold and bonds for better returns?

      Yes, combining gold and bonds can balance risk and returns while diversifying your portfolio.

    5. Which is safer for my savings, gold or bonds?

      Bonds are generally safer for stable returns, while gold protects against inflation but can be volatile in price.

  • The Benefits Of Investing In Corporate Bonds

    Bonds are debt market products that, as their name suggests, pay a fixed interest rate annually or at regular intervals and can be redeemed at the end of a certain time period. Bonds are fixed-income securities that act as a private company’s assurance to raise money for operating costs. Most of these bonds are traded on the secondary market and are also available to investors as “dematerialized” bonds. Before you buy private sector bonds, here are some things to think about.

    1. Is it backed by a reputable business group?

    These corporate bonds from the private sector are at risk of default, but government bonds are not. As an investor, default risk may have two effects on you. First, the company can have bad financial results and be forced to stop making principal repayments and periodic interest payments. Second, even if the bond is traded on the stock market, it could be downgraded by the rating agencies. This would cause the price of the bond to drop.

    2. Don’t try to find more ways to make money

    Going down the grading curve to find higher yields on private bonds is very common, even among fund managers. For instance, a corporate bond with a AAA rating will have the lowest interest rate. But if you choose bonds with an AA or A rating, the yield will be higher because these companies are more likely to pay higher rates than AAA companies. Even though not every AA or A-rated company will go bankrupt, it is a risk, so you should be careful. If you can’t sell the bond on the secondary market or don’t have time to keep an eye on how the company is doing, the risk is higher.

    3. Keep in mind that private-sector bonds make you pay more in taxes

    Your actual returns depend on how the tax treatment works out in the end. When you buy private bonds, the interest you earn is taxed at your highest rate, say 30%. So, if the bond pays you an interest rate of 11%, your real yield after taxes is only 8.7%. (11-3.3). Even though the lock-in term may be longer, it may be better to invest in an infrastructure bond that saves taxes. For example, if the interest rate on a tax-free bond for infrastructure is 6.5%, the effective after-tax yield will be 9.3% (6.5/0.7). In reality, an infrastructure bond has a higher effective yield and a much lower risk of default.

    4. You might find that investing in debt funds is a better idea

    If you want stability, debt funds may be a much better option for you. Debt funds let you benefit from both the interest on bonds and the growth of your capital when interest rates go down. The second benefit of debt funds is that they build a portfolio of different types of debt instruments with different levels of risk. This makes your overall exposure risk much lower. It’s hard to come up with this much variety on your own. Third, unlike bonds, which are usually hard to sell quickly, debt funds are easy to buy back. Price anomalies can also make it so that the prices don’t reflect the bond’s true value. Last but not least, debt funds are much better than private sector bonds when it comes to taxes. If you choose a debt fund’s dividend plan, you can take out the profits without having to pay taxes because dividends from debt funds are tax-free in the hands of the investor.

    The yield on private sector bonds is a little bit higher than that on bank FDs, but the risks are also a little bit higher. Before putting money into private sector debt, you should know this.

  • How To Figure Out The Yield And Price Of Bonds

    Many investors find it hard to understand bond prices and the possible returns from bond investments. Many new investors will be shocked to learn that the value of bonds changes every day, just like the value of any other publicly traded security.

    The yield is the amount of money someone can expect to make from investing in bonds. The easiest way to figure this out is to use the formula yield = (coupon amount) / (price). If the bond is bought at face value, the yield may be the same as the interest rate. So, the yield changes along with the price of the bond.

    Another yield that investors often figure out is the amount of money they get back when their bonds mature. This more complicated calculation will give the expected total yield if the bond is held until it matures.

    What are the parts of market bonds?

    If you want to learn more about the different kinds of bonds you can invest in, you can choose from a wide range of bonds on the market. The bonds you choose to buy in the end will depend on how well you can handle risk and how much money you have to invest. Even though bonds are safer than stocks, they come in many different types, so you should learn about all of them before you invest.

    Most bonds can be broken up into:

    Government bonds: These are bonds that the government itself gives out. Because the Indian government paid for them, they are safe. Most of the time, the interest rate on these bonds is not very high. In the Reserve Bank of India’s list of “government bonds,” there are other differences between fixed and floating bonds. You should know a little bit about these subcategories because they might affect the investments you make.

    Fixed-rate securities: These are bonds with a fixed interest rate. This rate won’t change as long as the bond is in effect. Even if market rates change, this fixed rate will still apply. When the market is doing well, you can expect small returns, but you are also protected.

    Bonds with variable rates: As their name suggests, the interest rates on these bonds will change based on the highs and lows of the market. If the market changes in a good way, you could make money, but if they change in a bad way, you could lose your profits.

    Corporate bonds: bonds from private companies are called corporate bonds. The bonds that these companies give out can be secured or not. When choosing a market, you should be aware of the different types of corporate bonds. Corporate bonds that are backed by collateral are safe. This means that the issuer will pay back the investment if the bond goes bad before or at the time it is due. Debentures are basically unsecured corporate bonds, and all they are is a promise from the company to pay back the bond. In other words, businesses promise to pay interest on time and pay it when it’s due. These bonds could be a bet on the value of “faith” more than anything else.

    Bonds that save people money on taxes: The Indian government gives out bonds that save people money on taxes or are tax-free. Aside from the interest, the owner would also benefit from a tax point of view. Seniors and anyone else who wants to pay less in taxes over time might want to look into these bonds.

    Bank and financial institution bonds are bonds that banks and other financial institutions give out. Many of the bonds in this category come from this business sector. The financial institutions that back these bonds have been rated by the government and have a history of making good financial decisions.

  • Are Tax-Free Bonds Right For You?

    In the past few years, investors with a lot of money have been more interested in tax-free bonds. Large infrastructure players can raise money at the end of the fiscal year by selling tax-free bonds. By offering these tax-free bonds, the government can help pay for infrastructure. There are two main types of bonds that don’t have to pay taxes. Let’s try to understand them better.

    First, there are Section 54EC bonds. If you buy them with the money you made from a sale, you can get a tax break. Because of the benefit in Section 54EC, you won’t have to pay tax on your capital gains. The interest that investors get from Section 54EC bonds will be fully taxed in their hands. Second, there are bonds that the investor doesn’t have to pay any taxes on. This means that interest is paid on them regularly. If you are in the 30% tax bracket, a 6% tax-free bond will give you an effective yield before taxes of 8.57 %.

    Does it make sense to buy Section 54EC bonds?

    HNIs seem to want these bonds a lot because they see it as a good way to lower their capital gains tax. But there are a few important things you should remember about buying these bonds. To make up for the tax benefit, the returns on these bonds are much lower than on regular bonds and bank FDs. So, it only makes sense if you really have capital gains that you need to pay less tax on. Second, to get a tax credit under Section 54EC, you must invest the whole amount, not just the capital gains. There is a cost to that in the form of missed chances to invest in other things. So, unless capital gains make up a big part of your total sales profits, these bonds aren’t very helpful.

    Taking into account the indexing benefits of long-term holding might be a better way to figure out how much capital gains tax you have to pay. If, after accounting for indexing, your total tax bill is less than 10% of your income, it makes sense to pay down the tax and put the rest of the money into investments that will make you more money. You can also use Section 54 to your advantage if you use the money to buy another property. Taking into account the lock-in period and the opportunity cost of investing the whole return, the tax savings bond may not be worth much to investors.

    Are bonds that don’t get taxed a good choice for investors?

    As was already said, these tax-free bonds involve investing in a business that focuses on infrastructure and will allow you to get interest without having to pay taxes on it. When taxation is taken into account, the effective returns are at first higher than those of taxable bonds. During the lock-in period, however, your bonds are pretty much just sitting in your demat account. This can be quite discouraging. Since this asset doesn’t really make money over time, the key question is whether or not the lock-in period is worth it. The bond’s value hasn’t changed much, so it would be better to stick with traditional bonds and fixed deposits (FDs), which don’t have lock-in periods and can be quickly and easily turned into cash.

    Why not think about debt funds as a better option?

    Through debt, you should be able to meet your basic needs for security and guaranteed profits. Choose debt funds if you want to make the best choice. First, you won’t have to pay taxes on the dividends you decide to get. Second, debt funds are easy to cash out because they are liquid and can be sold in less than two days. Third, investors worry about interest rates and the chance of a default. The risk of interest rates will be looked at separately, but the risk of default can be cut down by focusing on risk-free G-Sec funds. Now, let’s talk about the risks that come with interest rates. In the current economic situation, rates have stayed low, which means that they should help with debt funds. When market rates go down, the NAV of debt funds goes up, so investors can make money from both interest and capital gains. Even bonds that don’t have to pay taxes don’t help in this way.

    In the end, it’s easy to get sucked in by how appealing tax-saving bonds seem, but you need to do the math right. Before you decide whether or not to buy these tax-free bonds, look at what else you can do.

  • A Quick Commentary On India’s Sovereign Green Bonds Worth $3.3 Billion

    There’s an interesting backstory behind India’s sovereign bond issuance. The idea was approved in the Union Budget around two years ago, with a goal of raising up to $10 billion through sovereign bonds. Internal opposition grew, and the proposal was eventually scrapped after the PMO interfered.

    In this context, the Indian government’s recent plan to issue $3.3 billion in sovereign green bonds is significant.

    Sovereign green bonds are similar to any other government-issued sovereign bond. The only difference is the use of the cash raised, which can only be used for activities and initiatives that reduce carbon emissions, such as renewable energy, green hydrogen, and rechargeable batteries.

    These green bonds have a reduced cost of capital because they provide carbon neutrality benefits to their buyers.

    The problem is likely to debut in the market in the first or second quarter of FY23, with the finer specifics to be revealed later. This will be the first tranche, and if there is sufficient demand for green bonds, the centre may consider selling more than $3.3 billion in green bonds.

    This problem represents a significant shift in the Indian economy’s commitment to a low-carbon future. Costs and other details are still being worked out.

    To some extent, India’s venture into green bonds mitigates the risk of sovereign bonds. Because sovereign bonds are usually denominated in hard currencies like the US Dollar or the Euro, they tend to increase the issuer’s liabilities if the native currency falls.

    This step will also help India achieve its objective of becoming carbon neutral and net-zero emissions by the year 2070.

    While the 10-year benchmark sovereign bond yield is currently about 6.85 percent, the government expects to be able to borrow at a lower rate through green bonds.

    That will be the key draw, because it may not make sense for India to take on the risk of national debt unless the difference is large enough. This is in line with the global surge in renewable energy, sustainable business models, and sustainable strategy.

    Indian conglomerates such as Reliance and Adani have committed billions of dollars to green projects such as renewable energy, green hydrogen, electric vehicle batteries, and electric vehicle ecosystems.

    India, the world’s third-largest emitter of greenhouse emissions, wants to double its renewable energy producing capacity by 2030. The timing is right for the launch, with global investor and lender enthusiasm for green firms at an all-time high.

  • Here’s How Bond Yields Affect The Market

    On Wednesday, India’s benchmark 10-year government bond yields soared to a high of 6.66 per cent before falling to 6.60 per cent.

    What has caused this increase? Rising crude oil prices, inflationary threats, and earlier-than-expected interest rate hikes indicated by the US Federal Reserve have all contributed to bond yields hardening. Rising bond yields, logically, have sparked anticipation that the Reserve Bank of India (RBI) may eventually abandon its accommodative policy and begin increasing interest rates.

    What is the difference between a bond and a bond yield?

    Bonds are simply loans made to a firm or the government. Throughout the loan’s term, the interest payments are virtually unchanged. Furthermore, if the borrower does not default, the principle is returned after the loan term.

    Bond yield is the rate of return that an investor receives on a certain bond or government instrument.

    Bond yields and prices are linked.

    Bond prices rise and fall in response to changes in interest rates in an economy. Bond yields, on the other hand, fall/rise in response to this.

    Bond yields and inflation expectations

    As money moves from relatively safer investment bets to riskier equities, a stock market boom tends to raise yields. When inflationary pressures rise, however, investors tend to return to bond markets and sell shares.

    What impact do bonds have on stock markets?

    Before we get into how the share market is impacted by bonds and bond yields, you need one of the best trading accounts from a leading online stock broker like Zebu to capitalise on market changes. With a leading online trading platform, you can anticipate market moves and maximise your profits.

    More on how bond yields affect the stock markets:

    To calculate the expected rate of return, investors add the equity risk premium they seek to a risk-free rate when pricing equities. Defaulting to the long government bond yield is usually the simplest way to estimate the risk-free rate. Long bond yields are important to equities because of this.

    Given that the risk-free rate is the long bond yield, a higher bond yield is unfavourable for equities, and vice versa. However, it’s important to recognise why bond rates are changing, not just the direction in which they’re changing.

    Long bond yields reflect the economy’s growth and inflation mix. Bond yields normally rise when growth is robust. They also rise in response to rising inflation. However, the impact of these is different for stocks.

    When growth is strong, the positive impact of larger cash flows or, more accurately, dividends more than outweighs the negative impact of higher yields, resulting in higher equity share values.

    The difference between actual GDP growth and the 10-year bond yield corresponds well with stock prices. Indeed, share prices should be fine if GDP increases faster than bond yields in the next month.

    If growth accelerates from here equities are likely to break this range on the upside, in line with the fundamental relationship.

    How Should Investors Play It?

    In the scenario that growth accelerates, investors can opt for rate-sensitive instruments like mid- and small-cap stocks and funds. However, if inflation makes a rapid return, you can go with reliable companies in solid sectors like technology, healthcare and FMCG.

    Whatever your take is on bond yields and their correlation to the Indian markets, you need the best online trading platform to change your game plan. At Zebu, we have taken our expertise as one of the leading online stock brokers in India and created the best trading accounts and investment platform to seamlessly capitalise on any economic macro and invest in the best stocks and funds that you find reliable. To know more about our products and services, please get in touch with us.