Financial Daily from THE HINDU group of publications
Sunday, Dec 21, 2003
Financial Daily from THE HINDU group of publications Sunday, Dec 21, 2003 |
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Investment World
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Investments Money & Banking - Corporate Bonds ICICI's Tax Saving Bond: Subscribe Suresh Krishnamurthy
Terms of offer: There are four options on offer. Interest is paid annually in Options I and III. Options II and IV are in the nature of deep discount bonds. If you have exhausted the limits under Section 80-L and if your investments in deep discount bonds do not exceed Rs 1 lakh, this option can be considered. Options I and II are short-term bonds with a term to maturity of three years or more. Option III and IV are long-term, with a term to maturity of five years or more. Given the interest rate scene, investing in the longer-term bond is generally better. For investment in shorter-term bond to be a more attractive proposition over a five-year timeframe, yields on short-term investments, three-years from now, have to be much better than what they are now. Yields on two-year investments have to be about 5.5 per cent then. This is about 1-1.5 per cent higher than what is available right now. Since such a rise in yields appears unlikely, investing in the longer-term option appears a better bet. However, if after the maturity of these bonds, investors were to invest in bonds with an even longer maturity or in other asset classes, then investing in the shorter-term option would be suitable. For instance, if after three years, you are likely to invest in a 10-year bond, the shorter-term option would be better.
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