Moneyed · the trade nobody explains

A bond is not a fixed deposit.

They are sold in the same breath because both say “fixed”. One of them is a number that cannot move. The other is a number that moves every day, in the opposite direction to interest rates. Here is the difference, in full, before anybody quotes you a percent.

Fixed deposit

A promise from a bank

₹1,00,000

and it stays ₹1,00,000, whatever happens next

What you own: A contract. You are a depositor.
Who stands behind it: DICGC insures up to ₹5,00,000 per depositor per bank, principal and interest together. Above that, and for a company or NBFC deposit, you are on the issuer.
Getting out early: Break it. You keep the principal and give up some interest — the penalty is in your deposit receipt.
Does the value move?: No. Rates can double tomorrow and your FD is the same number.

Bond

A loan you can resell

₹92,418 – ₹1,08,425

the same ₹1,00,000 bond, depending only on where rates went

What you own: A tradeable security. You are a lender to the issuer.
Who stands behind it: Nobody insures it. There is no DICGC for bonds. If the issuer cannot pay, you are a creditor in a queue.
Getting out early: Sell it in the market — at whatever it is worth that day, which may be more or less than you paid.
Does the value move?: Yes, daily, and against you when rates rise. See below.

Why a bond falls when rates rise

You buy a ₹1,00,000 bond paying 8% for five years. Nothing about your bond changes afterwards — it still pays ₹8,000 a year and returns ₹1,00,000 at the end. What changes is everyone else’s options.

If new bonds start paying 9%, nobody will buy your 8% bond at full price. They will pay less, so that the lower coupon plus the discount adds up to the same 9%. That is the whole mechanism.

If market rates go to	Your bond is worth	Change
6.0%	₹1,08,425	+8.4%
7.0%	₹1,04,100	+4.1%
8.0% — where you bought	₹1,00,000	—
9.0%	₹96,110	−3.9%
10.0%	₹92,418	−7.6%

An FD in the same five years: ₹1,00,000 in every single one of those rows.

The escape hatch, and its price. Hold the bond to maturity and none of this touches you — you get your ₹1,00,000 back and every coupon on the way. The loss only becomes real if you have to sell early. So the honest question is not “is a bond risky”. It is: can you promise not to need this money for five years? If the answer is no, that column of red numbers is yours.

Yield is not the coupon

A bond advertised as “8%” is telling you its coupon — what it pays on its face value. What you actually earn is the yield, and that depends on the price you paid.

Buy that 8% bond at ₹96,110 and you earn 9%, not 8%. Buy it at ₹1,04,100 and you earn 7%. Same bond, same coupon, three different returns. When a platform shows you one number, check which one it is.

So what is the extra percent paying for?

When a bond offers more than an FD, the gap is not a discovery. It is a price, and you are being paid to take three things:

Credit risk — the issuer might not pay. An FD under ₹5 lakh at a bank has DICGC behind it; a bond has the issuer and nothing else.
Price risk — the table above, if you need to exit.
Liquidity risk — an FD can always be broken. A bond needs somebody willing to buy it that day, and for smaller issues there may not be one.

None of that makes a bond a bad instrument. It makes it a different instrument, and the extra yield is the fee the market pays you for carrying those three. Whether that is a fair trade depends on the issuer and on you — which is exactly the part no advertisement covers.

Before you are quoted a number

Ask whether the figure is a coupon or a yield.
Ask for the issuer’s credit rating, and who rated it.
Ask what happens if you need the money in year two.
For an FD, check whether it is a bank deposit — DICGC cover — or a company or NBFC deposit, which has none.
Check that whoever is selling it is registered to sell it. For bonds sold online in India that means a SEBI-registered broker holding an Online Bond Platform Provider licence, and the registration number should be on the page.

This page is education, not advice. It explains how two instruments behave; it does not recommend either, and it does not sell either. Moneyed is not a SEBI-registered investment adviser and is not an Online Bond Platform Provider. We do not distribute bonds, fixed deposits, mutual funds or any other investment product. The arithmetic above is a plain five-year bond priced on standard present-value maths, shown so you can check it yourself; a real bond’s terms, call options, tax treatment and rating are its own. DICGC cover, deposit rules and tax treatment change — verify them against DICGC, the RBI and the issuer before you act.