Invested in SGB 2019-20 Series V? You can secure this much return on premature redemption; should you break your bond? 

Investors in the Sovereign Gold Bond (SGB) 2019-20 Series V are now presented with the opportunity to redeem their bonds prematurely, as the redemption price is set at Rs 9,069 per gram. This marks the first option for early redemption, beginning on April 15, 2025, following its issuance on October 15, 2019, at a price of Rs 3,788 per gram. Over a period of 5.5 years, the bond has yielded a significant return of 139%, exclusive of the annual interest payouts. This development offers a lucrative option for investors seeking liquidity or wishing to capitalise on their investments early. 

The premature redemption option is in line with the guidelines of the Sovereign Gold Bond Scheme, allowing investors to redeem their holdings after five years from the issue date. While these bonds have a maturity period of eight years, extending until October 15, 2027, the early redemption feature provides flexibility for those looking to realise their profits sooner. The redemption price is determined based on the average closing gold prices (999 purity) from the last three working days before the redemption date, as published by the India Bullion and Jewellers Association (IBJA). 

SGBs are government-backed securities offering returns linked to the price of gold, making them an attractive investment for those inclined towards the precious metal. Despite the discontinuation of fresh issuances of the Sovereign Gold Bond scheme in the Union Budget 2025, existing bonds continue to be active and will be redeemed either at maturity or on eligible early redemption dates. This decision was influenced by the continuous rise in domestic gold prices, prompting the government to halt new bond issuances while maintaining the viability of current ones.

In addition to capital gains, SGB holders benefit from an annual interest of 2.5%, paid semi-annually. This interest component further enhances the total returns for investors who opt to retain the bonds until maturity. The combination of capital gains and interest payments underscores the attractiveness of SGBs as an investment vehicle, particularly in a landscape where gold prices have shown a strong upward trajectory. The ability to redeem early without sacrificing accrued interest positions these bonds favourably among other investment options. 

The SGB 2019-20 Series V has demonstrated impressive returns, significantly outperforming typical investment benchmarks. As gold prices have surged, these bonds have mirrored the precious metal's upward trend, delivering returns that appeal to both conservative and growth-oriented investors. The decision to allow premature redemption provides an avenue for investors to lock in profits or access funds earlier than the original maturity date, adding a layer of flexibility and attractiveness to the investment. 

The cessation of new SGB issuances, while maintaining the redemption options for existing bonds, reflects a strategic response to market conditions characterised by rising gold prices. This adjustment ensures that investors currently holding SGBs can continue to benefit from favourable market conditions while offering a secure and profitable exit strategy through early redemption. The government’s decision aligns with broader market trends, enhancing investor confidence in the scheme's stability and return potential.