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SGB return vs issue price: what returns do you expect to get from SGB?

This article compares the currently active SGBs vs the latest SGB issue price to see what returns are implied for investors who are already invested.

SGB return vs issue price: what returns do you expect to get from SGB?


Posted on 12 Feb 2024
Author: Sayan Sircar
5 mins read
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This article compares the currently active SGBs vs the latest SGB issue price to see what returns are implied for investors who are already invested.

SGB return vs issue price: what returns do you expect to get from SGB?

This article is a part of our detailed article series on the concept of Sovereign Gold Bond (SGB). Ensure you have read the other parts here:

📚 Topics covered:

How is the SGB price determined?

As per RBI, the price of SGB is fixed in Indian Rupees based on the simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association (IBJA) Limited for the last three working days of the week preceding the subscription period. Retail investors get a ₹50/unit discount if they apply online. RBI will issue a Press Release stating the Bond’s issue price before the new issue opens.

For example, if the issue opens on a Monday, the SGB issue price is the simple average of the IBJA closing prices of the previous Friday, Thursday and Wednesday for 999 purity gold.

Related:
Frequently asked questions on Sovereign Gold Bonds (SGB): the complete guide

How has the issue price of SGB changed over time?

The complete SGB price history in India is here:

SGB Complete Price History In India

You can read the details of SGB price history here: Sovereign Gold Bond (SGB): complete issue price history in India

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What return can we expect to get from SGB?

We have compared the currently active SGBs (those not yet matured) against the latest one: Sovereign Gold Bond (SGB) 2023-24 (Series IV): Who Should Invest?

SGB Return Vs the Issue Price Of the Latest Bond

To understand whether these SGB implied returns are good or not:

As the chart shows, prices of gold are at a historical high which leads to lower return expectation at maturity. The highest implied return, based on the May 2019 issue is 15.41% (excluding 2.5% interest). The lowest return is expected from the July 2020 bond which was issued at the high gold price levels during the COVID-19 pandemic.

Investors should note that this return calculation is based on the current age of active SGBs in the market and excludes these matured ones:

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This post titled SGB return vs issue price: what returns do you expect to get from SGB? first appeared on 12 Feb 2024 at https://arthgyaan.com


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