What is Bharat Bond ETF?
The government has approved the launch of Bharat Bond ETF and it will be launched by Edelweiss AMC. India’s first corporate bond exchange-traded fund, comprising a debt of state-run companies.
This move is intended to help retail investors to buy government debt directly. This is an initiative to deepen the corporate credit market India which was signaled by Hon’ble Finance Minister during policy announcements in August 2019.
This could be just the beginning of new issues in the market as corporate will want to diversify their lender profile from just banks and MFs.
Bharat Bond ETF will provide retail investors easy and low-cost access to bond markets with smaller amounts, as low as ₹1,000.
Bharat Bond ETF will be a basket of bonds issued by central public sector enterprises/undertakings or any other government organization bonds.
Is Bharat Bond ETF a Good Investment?
Bharat Bond ETF is a replacement/option for liquid funds/long term debt mutual funds. It comes at low cost, lower credit risk only duration risk in 10-year bond ETF.
You will earn the promised yield on a bond if you hold the band up to maturity. If you choose to sell it before maturity, the yield could lower/ higher depending on the interest rates (higher interest rates results to fall in bond prices and vice versa).
Bharat Bond ETF can be considered if as one of the options to park your short term funds (1-5 years) in 3-year maturity ETF and long term funds (>5 years) 10-year maturity ETF.
However, since the bond market in India is still at a nascent stage, the liquidity of the bonds may or may not be adequate in the initial years.
Consider this ETF only for smaller allocation in your larger scheme of things.
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