Tax-free bonds score in secondary market
As interest rates are expected to move south, many savvy investors are buying tax-free bonds in the secondary market. Some of these an effective yield of over seven per cent or 10 per cent return before tax — an attractive rate for those in the highest income tax bracket. "We are advising the clients who are looking to make fresh investments in debt to add tax-free bonds in their portfolio. It's a good time to get into these bonds. With pre-tax returns of around 10 per cent, they are attractive compared to other instruments," says Sriram Iyer, chief executive officer of Religare Wealth Management. These bonds are liquid and are issued by companies that are not only backed by the government but also have high credit ratings. "The interest rate risk at present is also low as rates are expected to go down further. These factors make them extremely safe to invest," Iyer says. State Bank of India's 10-year fixed deposit offers seven per cent interest. For those
