Goldman Sachs has recommended going long on India's 30-year government bonds, expecting yields to decline from current levels. According to reports from Business Standard, the inclusion of the benchmark 30-year bond under the Fully Accessible Route (FAR) could broaden demand from foreign investors. This recommendation comes as money is moving from bank deposits into long-term financial products such as pension instruments, Public Provident Fund (PPF) and insurance, which can increase demand for ultra-long government securities.
Government securities in India are available across long tenors, from the 10-year benchmark to 30-, 40-, and even 50-year bonds. As reported by Business Standard, Nischay Nath, founder and CEO of BondScanner, notes that the 10-year benchmark is the 6.48 per cent Government Security 2035, with bonds also available in 14-, 15-, 30-, 40-, and nearly 50-year tenors. The lower face value of ~₹10,000 has made these bonds more accessible to retail investors. Investors can buy them directly through Reserve Bank of India (RBI) Retail Direct or indirectly through gilt mutual funds.
Long-duration government securities offer sovereign-backed safety and allow investors to lock in attractive yields for a long period. According to Business Standard, these securities offer retail investors safety, predictable returns and regular income. The primary advantage is safety, as central government bonds carry a sovereign guarantee with virtually no credit or default risk. Investors who hold these bonds to maturity can lock in current yields for decades and earn periodic coupon payments. Government securities are not subject to tax deducted at source (TDS) and if interest rates decline, bond prices may also rise, offering capital appreciation.
Long-dated government securities carry several risks despite their sovereign backing. As reported by Business Standard, the biggest risk is interest-rate risk, as longer-maturity bonds experience sharper price swings when rates move. Investors who sell before maturity could face capital losses. Inflation can erode the purchasing power of fixed coupon payments over time, and ultra-long bonds may have lower liquidity, which can make early exits more difficult. Investors also face reinvestment risk on coupon payments, and interest income is taxed at the applicable slab rate.
Long-duration government securities are best suited for investors with a horizon of at least 10 years. According to Business Standard, these securities suit long-term savers who want sovereign-backed, predictable returns and can hold them until maturity. Vineet Agrawal, co-founder of Jiraaf, recommends that a 30-year G-sec should ideally form the safety-oriented portion of a retirement corpus, not fund near-term goals. Harsh Vira, founder of FinPro Wealth, suggests these bonds are suitable for retirees, pension-focused investors, or those matching future liabilities, especially if they expect interest rates to decline over time. New investors should start with a small allocation and hold the security until maturity to reduce the impact of interim price volatility.
