Bonds at Discounted Price

Features of Bonds at Discounted Price

Certain bonds are offered at a lower price than the face value promised at maturity. Market rates and credit ratings can often be the factors influencing the issuance of these discount bonds.

Ideal for Moderate to High-Risk Investors

The risk of default involved in discount bonds is greater compared to other bonds. It is more suitable for investors willing to take higher risks for a higher ROI.

Higher Returns

As the initial purchasing price is lower than the promised face value, investors can earn higher returns on their investments.

Payments

The different types of discount bonds can have different payout structures. For example, Zero-coupon bonds offer significant discounts but do not offer periodic payments. On the other hand, distressed bonds offer coupon payments monthly, quarterly, semi-annually and annually.

Liquidity

Discount bonds can be traded in secondary markets and are hence considered liquid.

Tax Treatment

Since zero coupon bonds do not offer interest payout, tax on interest does not imply. However, the difference between the initial purchase price and the face value generated at maturity is considered a capital gain. Therefore, short term or long term capital gain tax will be imposed based on the maturity date.

Benefits of Bonds at Discounted Price

• Lower Purchase Price: These bonds allow investors to earn better returns against a significantly lower investment than many other debt securities.

• Capital Appreciation: When or as the bond is purchased at a discount and held till maturity, the investor earns a higher face value, resulting in a profit.

• Increased Income: Some bonds offer periodic returns and high face value. Thus, investors can enjoy regular income and a high amount on maturity.

Credit Rating of Bonds at Discounted Price

Credit rating agencies evaluate bonds based on important factors like their asset quality, risk management, market position, and so on. A thorough evaluation helps identify the chance of payment default that a bond can have

The following list will allow you to understand the different ratings given by CRISIL, ICRA, CARE, IND, and other agencies.

• AAA: highest degree of safety, lowest credit risk

• AA-, AA, AA+: high degree of safety, very low credit risk

• A-, A, A+: adequate degree of safety, low credit risk

• BBB-, BBB, BBB+ : Moderate degree of safety, moderate credit risk

• BB: Moderate risk of default

• B-, B, B+: high risk of default

• C: very high risk of default

• D: In default or expected to be in default

Investing in Bonds at Discounted Price

Invest in the top-rated discount bonds in India in three quick and easy steps on GoldenPi:

• Step 1:Register on GoldenPi

• Step 2:Check out the huge list of discount bonds.

• Step 3:Monitor your investments and receive notifications on maturity.