The fixed income market is back on investors’ radar, and for good reason. With yields having moved up in the past couple of years, many bonds are offering attractive interest rates. Yield on the benchmark 10-year government securities provides some perspective. From a low of 5. 8% in June 2020, it has risen to 7. 4%. But not all bonds are available for retail folks to invest in. Take for example municipal bonds or non-convertible debentures (NCDs) which, until the recent issue from Indore Municipal Corp. , have all been privately placed so far. Also, these bonds have high face value – they come in denominations of Rs. 10 lakh – putting them out of reach of retail investors. While these bonds are listed on the exchanges, they lack trading volumes. “They offer very little liquidity as there are no willing sellers or buyers at any particular point in time. Bonds from earlier issuances have mostly been held by institutions with a long-term horizon," says Deepak Jasani, head of retail research, HDFC Securities. He however, expects the Indore Municipal Corp. bonds to have sufficient liquidity in the secondary market, enabling investors to buy and sell them. The availability issue aside, it’s important to remember that these bonds typically come with AA-, AA, or AA+ ratings, and to that extent, cannot be considered as low-risk as Government of India or state government bonds, both of which are backed by central government guarantees. “Municipal bonds are issued by local government bodies, and do not carry any government guarantee. Having said that, no municipal corporation has ever defaulted on its debt," says Jasani. He also highlights that these bonds have a structured payment mechanism whereby the coupon and principal repayment is done via an escrow account. The municipal corporation has to periodically move a fixed sum of money (for these payments) from its revenues into the escrow account. This provides some assurance on the bonds being serviced on time. View Full Image Graphic: Mint Share Via The latest issue The Indore Municipal Corp. recently came out with an issue of green municipal NCDs with a face value of Rs. 1,000 comprising of four STRPPs (separately transferable and redeemable principal parts), that is, STRPP A, B, C and D, each with a face value of Rs. 250, and coupon rate of 8. 25% per annum, payable half-yearly. The four STRPPs have tenures of 3, 5, 7 and 9 years, respectively. The primary issue was open during 10-14 February, and called for a minimum application amount of Rs. 10,000. For each NCD allotted, the investors will be allotted four STRPPs. The Green Bonds have been assigned a rating of ‘CARE AA: Stable’ by CARE Ratings and ‘IND AA+/Stable’ by India Ratings & Research. This is a notch below the AAA rating which indicates the highest degree of safety. With the primary issue closed, you can invest in these NCDs only once they get listed on the National Stock Exchange on 21 February. You will need a broking account for this. They will trade separately with individual ISINs (International Securities Identification Number) on the exchange. That is, you can buy and sell each STRPP separately, unlike in the primary issue, where each NCD allotted comprised four STRPPs with a range of maturities. MINT PREMIUM See All Premium India’s municipal bond market finally opens doors to re . . . Premium RBI’s nod to payment aggregators signals start of light . . . Premium Inflation will be harder to bring down than markets think Premium How to profit from India's lithium discovery With the Indore Municipal Corp. bond issue opening the market to retail investors, how should one view these bonds viz-a-viz corporate bonds of similar ratings? “You can compare them with corporate bonds on parameters such as maturity and ratings, and if the coupon rates or yield to maturity are similar or better than the corporate bonds, then one can delve more deeply into their financials and the escrow mechanism. If you are satisfied, you can invest in them," says Jasani. One can find ratings reports on these bond issuances on the websites of credit ratings agencies. This can be a good starting point to get an overview on the financials of the municipal corporations. ABOUT THE AUTHOR Maulik Madhu Maulik Madhu is a special correspondent at Mint. She started her career at the Competition Commission of India (CCI) and forayed into business journalism in 2012. Choosing to specialize in personal finance, she worked at FundsIndia and The Hindu Business Line, before joining Mint in March 2022. Read more from this author Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. More Less.