PSU Bonds are issued by Public Sector Undertakings – organizations that are owned by the government and work in the interest of the nation. This makes PSU bonds safer than the bonds of private entities because in the worst-case scenario the government can rescue PSUs but private entities need to generate profit to make interest payments.
NATIONAL HIGHWAYS AUTHORITY OF INDIA
|10 YEARS GSEC RATE LINKED
|28 Jun 48
0% RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LTD.
|31 Dec 26
7.22% INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LIMITED
|02 Jun 27
7.64% HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED
|02 Aug 31
8.12% INDIA INFRASTRUCTURE FINANCE COMPANY LIMITED
|24 Aug 24
8.69% KERALA FINANCIAL CORPORATION
|04 Apr 25
9.70% PUNJAB STATE INDUSTRIAL DEVELOPMENT CORP.LTD
|26 Aug 22
7.18% POWER FINANCE CORPORATION LTD.
|20 Jan 27
7.36% POWER GRID CORPORATION OF INDIA LIMITED
|18 Oct 26
8.48% INDIAN RAILWAY FINANCE CORPORATION LIMITED
|27 Nov 28
8.10% EXPORT IMPORT BANK OF INDIA
|19 Nov 25
7.14% BANK OF INDIA
|30 Sep 31
7.74% EXPORT IMPORT BANK OF INDIA
|26 May 37
7.34% POWER FINANCE CORPORATION LTD.
|29 Sep 35
8.72% KERALA FINANCIAL CORPORATION
|06 Jun 23
5.75% INDIAN RAILWAY FINANCE CORPORATION LIMITED
|30 Apr 23
EXPORT IMPORT BANK OF INDIA
|31 Dec 22
8.25% BANK OF BARODA
|31 Dec 99
8.48% POWER FINANCE CORPORATION LTD.
|12 Sep 24
9.45% STATE BANK OF INDIA
|31 Dec 99
Bonds issued by PSUs (Public Sector Undertakings) are popularly referred to as PSU Bonds. PSUs are government owned institutions that work in the interest of the nation.
Yes, government backed PSU (Public Sector Undertakings) issue Bonds. PSUs may issue bonds to fund projects, improve capitalisation (in case of banks) or just for working capital.
PSU bonds can be considered almost as safe as Government Bonds but not at the same level. We say this because even state government guaranteed PSUs have defaulted on their debt in the past. Further, not all PSUs are rated AAA (the highest rating) which shows absence of top notch financial health.
PSU bonds have varying interest rates depending on the bond tenure and credit rating. AAA-rated long-term PSU bonds have an interest rate of around ~8% while lower rated PSU bonds have interest rates as high as 11-12%.
Only some PSU bonds are guaranteed by governments. However, there is an implicit government guarantee applicable on all PSU bonds because of government ownership and support of the PSU.
Yes, PSU bonds are a type of corporate bond. Corporate bonds are all bonds issued by non government entities: PSU and private companies likewise.
Simply put, a AAA private sector bond is likely to be safer than a BBB rated PSU bond. But a AAA rated PSU bond can almost certainly be considered to be safer than a AAA rated private sector bond.
Bond issued by a private sector company
High safety because of government support
Lower safety than PSU bond if credit rating is same
Guaranteed by a government
Low to moderate
Moderate to high
Uttar Pradesh Power Corporation Limited
PSU bonds are considered to be safer than bonds issued by private sector companies. This makes PSU bonds safest among the corporate bond universe. Low risk investors should consider PSU bonds for their better than FD return and tax treatment (if held for more than 3 years)
PSU bonds are amongst the safest in the bonds universe. Yet, they are exposed to the same risks that other bonds are exposed to. These are interest rate risk, liquidity risk and credit default risk. Among this, credit default risk is quite low for PSU bonds. Interest rate risk and liquidity risk can be eliminated by holding the PSU bond until maturity.
The biggest advantage of investing in PSU bonds is the highest safety that they have. PSU bonds are safer than corporate bonds and almost as safe as government bonds. Investing in PSU bonds is a good idea if you are looking for principal protection and regular interest income.
The best PSU bonds for you may be different from the best PSU bonds for someone else. Here’s how you can identify the best NBFC bonds.
Credit rating: Are you a low risk investor or a moderate risk investor? A low risk investor should invest only in AAA rated PSU bonds. A moderate risk investor can consider a lower rated PSU bond.
Yield: You want the yield to be high. Because yield is inversely related to the credit rating, it is important to strike a balance between the two depending on your risk taking ability.
Maturity date: It is a good idea to align your investment time frame with the balance maturity of the PSU bond. This way you increase your likelihood of holding the bond until maturity. Holding the bond until maturity eliminates interest rate and liquidity risks.
Government guarantee: A government guaranteed PSU bond is extremely safe. Governments rarely default and this feature is shared by government guaranteed PSU bonds.
By filtering in the above manner, you can find a list of the best PSU bonds for your portfolio.