Long Term Bonds Investment Maturing after 5 Years

The longer the tenure, the longer your principal stays invested, and the longer the same coupon keeps flowing. That can be useful for goals far in the future, where matching the bond's maturity date to the goal date is the easiest way to plan.

What are Long-Term Bonds?

Long-term bonds are debt securities where the residual maturity runs beyond 60 months. The category covers corporate bonds, PSU bonds, government securities, state-related bonds, and select bank bonds.

When you buy a long-duration bond, you lend money to the issuer for the full tenure. The issuer pays a fixed coupon over the period. At the end, your principal returns to you. The coupon you receive when you buy is the coupon you keep for the rest of the bond's life.

Why Do Investors Choose a Long Tenure?

A long tenure has three common reasons behind it:

1. Long-dated goals. These bonds let you match the maturity date to a future need. Children's higher education, a planned home purchase, or retirement spending in the 2030s and 2040s are common reasons.
   
   
2. To lock in long-term interest rates. If you expect market interest rates to fall in the coming years, holding a long-tenure bond bought today means you keep earning the higher coupon even after market rates drop. This is the most direct way to capture today's coupon for the full tenure of the bond.
   
   
3. As part of long-term income planning. Investors building a long-dated income stream often want bonds maturing around the time their salary income stops. A 10-year fixed income window is a common target for those planning ahead.
   
   

Current Yields on Long-Duration Bonds On GoldenPi

Today, the bonds in this category are AA-rated and pay between 8.80% and 10.54%. 

The list rotates as new bonds get added and existing ones close. Two of the three current listings are state-related issuers (KIIFB from Kerala, AP State Beverages from Andhra Pradesh), which tend to come with longer tenures and the option to anchor a 10-year fixed-income view.

A Simple Example

Suppose you invest Rs. 50,000 in a long-term bond paying 9% per year with quarterly payouts. Annual interest works out to Rs. 4,500, or Rs. 1,125 per quarter. The bond matures in 9 years. Over the period, you receive about Rs. 40,500 in total interest. At maturity, your Rs. 50,000 principal returns.

If market interest rates fall to 7% three years after you buy, your bond still pays 9% for the remaining 6 years. That is the practical value of buying a long-tenure bond when rates are higher. 

Risks to Understand

Long tenure brings its own set of risks. Three to keep in mind:

1. Credit risk. Over 5-10 years, the issuer's financials, sector, and rating can change. A credit downgrade later in the tenure can hit the bond's resale value, and in rare cases, the payouts themselves.

2. Interest rate risk. This is larger for long bonds than for short ones. If market rates rise after you buy, the resale value of your bond falls more than a short bond's would. It only matters if you sell before maturity.
   
   
3. Liquidity risk. Listed long-duration bonds can trade thinly on the exchange. An early exit may not happen at the price you have in mind.
   
   

How to Invest on GoldenPi:

GoldenPi is a SEBI-registered Online Bond Platform Provider. The steps to invest in long-term bonds:

1. Log in to your KYC-verified account.
2. Open the Bonds Maturing after 5 Years (Long Term) section.
3. Filter by rating, issuer, yield, payout frequency, or maturity date.
4. Read the offer document and check the issuer's recent financials.
5. Pay through NEFT or RTGS from your bank account.
6. The bond enters your demat after settlement.

Taxation

Interest is added to your total income and taxed at your slab rate. Once annual interest from one issuer crosses Rs. 10,000, TDS at 10% applies to listed corporate NCDs under Section 193 of the Income Tax Act.

If you sell within 12 months, the profit is taxed at a slab. Beyond 12 months, the long-term capital gain on a listed bond is taxed at 12.5% without indexation under the Finance (No. 2) Act, 2024.

Conclusion:

Long-term bonds are useful when your goal is far enough away that a multi-year tenure matches the time horizon. The fixed coupon over many years can supplement other income sources and form part of a broader allocation to retirement planning debt assets.

The flip side is interest rate risk. A long bond's price reacts more strongly to rate changes than a short bond's price does. That matters if you might need to exit early. It does not matter if you intend to hold to maturity, since the coupon you locked in at purchase keeps coming regardless of market moves.

GoldenPi keeps the listings updated. Live ratings, yields, and maturity dates reflect the latest disclosures from each issuer.

Top 3 Long Term Bonds Investment Maturing after 5 Years