--- title: "Bonds and Fixed Income in India | RupeeCase Learn" description: "G-Secs, SDLs, corporate bonds, RBI Retail Direct, yield-to-maturity, duration risk, and the role of fixed income in a systematic multi-asset portfolio." source_url: "https://www.rupeecase.com/learn/path-6/module-6-7-bonds-fixed-income-india" --- [Path 06 7 of 9](/learn/path-6/)Bonds and Fixed Income in India[Next 6.8](/learn/path-6/module-6-8-reits-invits) Fixed income is the unglamorous half of a portfolio that most equity focused investors in India ignore. That is a mistake, and October 2026 is a good month to see why. On 7 October the RBI raised the repo rate by 25 basis points to 5.50%, its first hike since February 2023, and the 10 year government bond yield rose to around 7.2%, its highest in more than two years. Every long bond and long [duration](/learn/glossary#duration) debt fund in the country lost value that week. Understanding what drives bond returns, and how bonds behave when rates move, is essential for anyone building a multi asset portfolio. Here is the mechanics: yield, duration, credit risk and liquidity, and the products you can actually buy. **5.50%**RBI repo rate after the 7 Oct 2026 hike RBI monetary policy statement, 7 Oct 2026 **7.2%**10 year government bond yield, around the decision Market data, first week of Oct 2026 **4.8%**CPI inflation, August 2026 MOSPI **Rs 10,000**Minimum bid for government securities on RBI Retail Direct RBI 1. 7 Oct 2026**Hike to 5.50%, stance "calibrated tightening"**Oil above $100, a weak rupee and firmer inflation turn the cycle. 2. 7 Oct 2026**Hike to 5.50%, stance "calibrated tightening"**Oil above $100, a weak rupee and firmer inflation turn the cycle. 3. 7 Oct 2026**Hike to 5.50%, stance "calibrated tightening"**Oil above $100, a weak rupee and firmer inflation turn the cycle. 4. 7 Oct 2026**Hike to 5.50%, stance "calibrated tightening"**Oil above $100, a weak rupee and firmer inflation turn the cycle. Repo rate decisions of the RBI's Monetary Policy Committee. Bond prices rose through the cuts and fell as the hike approached. ## Types of fixed income instruments in India Government securities (G Secs) Issued by the central government, from 91 day treasury bills to 40 year bonds. No credit risk in rupee terms. Coupons are paid half yearly. Retail investors can buy them directly through RBI Retail Direct or on NSE and BSE. State development loans (SDLs) Bonds issued by state governments, usually at a small spread over central government bonds of similar maturity. Very low practical default risk; liquidity is lower than central bonds. Corporate bonds Issued by public sector and private companies, rated from AAA downwards. Higher yields pay you for credit risk and lower liquidity. Available through debt funds, on exchange platforms and through SEBI registered online bond platforms. Treasury bills and money market Instruments up to one year: T bills, commercial paper, certificates of deposit. Used for parking money and in liquid and overnight funds. ## Yield to maturity: the single most important bond metric Yield to maturity is the annual return you earn if you buy a bond today, hold it to maturity and reinvest the coupons at the same rate. It is the bond equivalent of [CAGR](/learn/glossary#cagr), and it lets you compare bonds with different coupons and prices. Two relationships every fixed income investor must know: * **Yield and price move in opposite directions.** When yields rise, existing bonds with lower coupons are worth less, so their prices fall. This is arithmetic, not opinion. * **Longer bonds move more.** The sensitivity of price to yield is called duration. A one percentage point rise in yield takes roughly 1% off a one year bond and about 7% off a ten year bond. A one point rise in yield hits long bonds hardest 1. 30 year bond**−11.10%** 2. 30 year bond**−11.10%** 3. 30 year bond**−11.10%** 4. 30 year bond**−11.10%** 5. 30 year bond**−11.10%** Price change of a 7.2% coupon bond, bought at par, when its yield rises from 7.2% to 8.2%. Half yearly coupons. Calculation by RupeeCase. Put October 2026 into the calculator. A 25 basis point rise on a portfolio with seven years of duration costs about 1.75%, ₹17,500 on ₹10 lakh, in days. That is not a loss if you hold the bond to maturity; you still earn the yield you bought at. It is very real if you need to sell, or if you own a long duration debt fund, which is valued at market prices every day. ## Credit risk and liquidity Government bonds carry interest rate risk but no credit risk. Corporate bonds carry both. A higher yield on a corporate bond is payment for the chance that the issuer pays late or not at all, and for the difficulty of selling it in a hurry. India learned this sharply in 2018 and 2019, when a large infrastructure lender and then a large housing finance company defaulted. Several credit risk debt funds had to segregate the bad paper into side pockets, and investors who had chased an extra two or three points of yield lost far more than that on the affected portion. The lesson is old and still ignored: in fixed income, extra yield without extra risk does not exist. **Myth**Government bonds are risk free, so a gilt fund cannot lose money. **Fact**They have no credit risk, but plenty of interest rate risk. A long gilt fund can fall several percent in weeks when yields rise, as it did around the October 2026 hike. ## RBI Retail Direct: direct access for individuals Since November 2021 RBI Retail Direct lets individuals open a gilt account with the RBI and buy government securities directly, in auctions and in the secondary market: * No brokerage and no fund management fee. * Non competitive bids in primary auctions from ₹10,000; you get the auction's cut off yield. * Central government bonds, treasury bills and state development loans. * Coupons and maturity proceeds go straight to your linked bank account. [RBI Retail Direct, official platform](https://rbiretaildirect.org.in/) ## Hold to maturity or a fund? Bond held to maturity #### You know the return on day one * Yield locked at purchase * Price swings do not matter if you hold * Interest taxed at your slab every year * Selling early can be hard and costly Debt fund #### Diversified, valued daily * No maturity unless it is a target maturity fund * NAV moves with rates every day * Gains taxed at slab when you redeem, for units bought after Mar 2023 * Easy to buy and sell in any amount Tap a side: the same rate move feels very different. ## How bonds are taxed Interest on bonds and government securities is taxed at your slab rate each year. Debt mutual fund units bought on or after 1 April 2023 are taxed at your slab rate whatever the holding period. Listed bonds sold after 12 months are taxed at 12.5% as long term capital gains, and unlisted bonds and debentures are taxed at slab rates. The after tax yield, not the headline yield, is what you compare with a fixed deposit. ## Fixed income in a systematic multi asset portfolio | Role | Instrument | Duration | When it helps | | --- | --- | --- | --- | | Cash and buffer | T bills, liquid and overnight funds, liquid ETFs | Up to 1 year | Money waiting to be invested; emergencies | | Defensive ballast | Short government and AAA bonds | 1 to 3 years | When equity risk is high; low price swings | | Rate view | Long government bonds, gilt funds | 7 years and more | When you expect yields to fall; painful when they rise | ## Common mistake: buying yield, not return The common mistake is choosing the debt product with the highest yield on the screen. The yield ignores credit losses, liquidity and tax. A 9% corporate bond taxed at 30% yields 6.3% after tax and carries default risk; a 7.2% government bond held to maturity carries none. A worked comparison makes the first point concrete. ₹10 lakh in a 9% corporate bond pays ₹90,000 a year; at a 30% slab you keep ₹63,000. ₹10 lakh in a 7.2% government bond pays ₹72,000; you keep ₹50,400. The corporate bond is ahead by ₹12,600 a year, about 1.3% of your capital. One default in that issuer, even with half recovered, wipes out roughly forty years of that extra income. The extra yield is real; so is the price of it. The second mistake is buying a long duration fund for money you need in a year. Duration is the right tool for a rate view over years, not for a parking place. Match the duration to the date you need the money. ## How this shows up in RupeeCase Fixed income on RupeeCase The multi asset strategies on RupeeCase hold a debt sleeve alongside equity and gold, through exchange traded instruments: a liquid fund [ETF](/learn/glossary#etf) and a government bond index ETF appear in the published holdings of [Dynamic Asset Allocator](/strategies/dynamic-asset-allocator), whose rule shifts part of the portfolio between equity and debt by regime. [Allcap Multi Asset](/strategies/allcap-multi-asset) keeps its sleeves fixed at 80% equity, 10% debt and 10% gold, reset at every rebalance, which is the rebalancing idea of Module 4.3 applied across asset classes. Everything sits in your own demat, and each factsheet shows the sleeves and the model's falls. Figures are model, back tested. ## Questions readers ask Why do bond funds fall when the RBI raises rates?Higher policy rates usually push market yields up, and when yields rise the prices of existing bonds fall. Funds holding longer bonds fall more, because their duration is higher. Is RBI Retail Direct safe?It is run by the RBI, and government securities carry no credit risk in rupees. Prices still move with interest rates if you sell before maturity. Are debt funds still tax efficient?Units bought on or after 1 April 2023 are taxed at your slab rate on redemption, like a fixed deposit's interest, but only when you redeem. That deferral is the remaining advantage. What does Bonds and Fixed Income in India cover?Most Indian investors think fixed income means FDs. The actual government securities market is far more sophisticated, more tax-efficient, and now directly accessible to retail investors through RBI Retail Direct. It works through Types of fixed income instruments in India, Yield to maturity: the single most important bond metric, Credit risk and liquidity, RBI Retail Direct: direct access for individuals and more. It is module 6.7 of Path 6, Indian Financial Products, about 8 minutes of reading, free. TTry it ## Bonds and Fixed Income in India, in numbers. Clean price, current yield, modified duration approximation Your numbers, the module's formula, nothing stored. Calculator ### Bond Price and Yield Calculator Annual coupon convention, semi-annual interpretation. India G-Sec benchmark assumes 1000 face value. Face value (INR)Coupon rate (%)Years to maturityYield to maturity (%) AApply it on RupeeCase ## Large Cap Multi Asset 20 largecap stocks plus LiquidCase and GoldBees. 80/10/10 multi-asset on the Nifty 100. An index built on the rules this path teaches, largecap equity plus debt and gold, conservative core, held stock by stock in your own demat. Risk band: Moderately High. [See the strategy](/strategies/largecap-multi-asset)[Sign up for RupeeCase](https://invest.rupeecase.com/signup?strategy=largecap-multi-asset) [CAGR24.4%Sharpe1.32Max DD−21.0%Minimum125000Model, back tested, as of 27 Apr 2026. Not client returns, not a promise.](/strategies/largecap-multi-asset) QQuick check ## 10 questions, 7 to pass. Pick an answer and the explanation appears. Your result stays on this device and counts towards the Path 06 certificate. CCheck yourself ## Path 06 so far. Your quick check results on this device, stop by stop. 1. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 2. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 3. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 4. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 5. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 6. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 7. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 8. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 9. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) 10. [TPath test, 28 questionsNot yet](/learn/path-6/module-6-9-gold-commodities-international#pathTestSection) Explore next ## Put the module to work. * [Blog noteLargecap Hybrid: a buffer is a shock absorber, not a shieldStrategy notes, a short note](/blog/2026-07-06-evening-largecap-hybrid-buffer/) * [Blog noteLarge Mid Hybrid: the debt sleeve that did two jobsStrategy notes, a short note](/blog/2026-07-06-evening-debt-sleeve-two-jobs/) * [StrategyTotalMarket Hybrid strategyNifty Total Market, 51 stocks, every 2 weeks](/strategies/totalmarket-hybrid) Community ## Join my WhatsApp group. Scan the code, fillFill one short form, and join my WhatsApp group. Slides, sources, factsheets and the rebalance logs live there, and members join a daily Google Meet with me. [Sign up for RupeeCase](https://invest.rupeecase.com/signup) [Join the WhatsApp group](https://forms.gle/C6HMtM1Z2GfeocQV7) [One form, one group](https://forms.gle/C6HMtM1Z2GfeocQV7)Scan with your phone camera SSources ## Where the figures come from. 1. [RBI, Government Securities Market in India: A Primer](https://www.rbi.org.in/) 2. [RBI, Government Securities Market in India: A Primer](https://www.rbi.org.in/) 3. [RBI, Government Securities Market in India: A Primer](https://www.rbi.org.in/) 4. [RBI, Government Securities Market in India: A Primer](https://www.rbi.org.in/) GTerms ## 5 terms from this module. G-SecGovernment Security, bond issued by the Government of India. Zero credit risk. Available in maturities from 91 days to 40 years. Now accessible via RBI Retail Direct. Yield-to-maturityThe annualised return if a bond is held to maturity and all coupons reinvested at the same rate. The primary metric to compare bonds. Price and yield move inversely. [Duration](/learn/glossary#duration)A bond's sensitivity to interest rate changes. A bond with duration 7 falls ~7% in price when yields rise 1%. Longer maturity = higher duration = higher interest rate risk. RBI Retail DirectRBI's platform allowing individual investors to buy G-Secs and SGBs directly without intermediaries. Zero fee. Minimum ₹10,000. Launched 2021. SDLState Development Loan, bonds issued by state governments, usually at a small yield spread over central government bonds of similar maturity. Available on RBI Retail Direct. [All 91 terms in the glossary](/learn/glossary) [From the podcast archiveEP34: Buy On Dips, 7 May, Sensex ExpiryThe Tanmay Edge, 7 May 2026, graded 5/5](/podcast/episodes/2026-05-07)[Pillar guideIndian Markets14 modules across paths 1, 6](/learn/indian-markets) Education only, not investment advice. RupeeCase is a technology platform operated by QC Alpha Technologies Pvt Ltd; it is not a fund, a PMS or a SEBI registered investment adviser. Model returns are back tested and not a promise of future returns. Figures carry the date they were checked.