Government of India Floating Rate Bond: RBI has announced the interest rate of Floating Rate Bond, 2031 (FRB 2031), which will be 7.69 percent per annum. This rate is higher than the interest on FDs of most big banks.
New Delhi. If you want to invest your money in such a place, which is absolutely safe and the interest on it is also better than Fixed Deposit (FD), then you can think about floating rate bonds of the government. The floating rate bond of the central government will get an interest rate of 7.69 percent for the next 6 months. The Reserve Bank of India (RBI) has announced the interest rates on this bond on Tuesday.
According to RBI, from 7 December 2022 to 6 June 2023 i.e. for half a year, the interest rate of Central Government Floating Rate Bond 2031 (FRB 2031) will be 7.69 percent per annum. Keep in mind that no government or private bank is offering such a high rate of interest on fixed deposits. Yes, some Small Finance Banks (SFBs) definitely give more interest than this.
RBI said, “It should be remembered that FRB, 2031 will have a coupon, whose base rate will be the same as that of the last 3 auctions (from the rate fixing day i.e. December 7, 2022) of 182 Day T-Bills.” Same as weighted average yield (WAY). The weighted average yield will be calculated by counting 365 days in a year.
No fixed coupon rate
Floating rate bonds are those securities which do not have any fixed coupon rate or interest rate. It has multiple coupon rates, which are reset or changed at predetermined time intervals.
A floating rate bond has a coupon with a base rate equal to the weighted average yield of the last 3 auctions of 182-day Treasury Bills (T-Bills). Also there is a fixed spread which is decided through auction. Significantly, bond yield means the return received on the bond.
Government securities closed with gains
Government securities closed with gains on Tuesday (December 6) as traders remained cautious ahead of RBI’s monetary policy decision.
Bond yield closed at 7.2486% on Tuesday
The benchmark 10-year 7.26%-2032 bond yield closed at 7.2486% on Tuesday, as against 7.2254% in its previous trading session.
How can invest
The question is, what needs to be done to invest in floating rate bonds of the government? Explain that you can buy floating rate bonds online from your bank. Apart from this, you can also buy them from the bank through check or draft.
