Most of India's listed bonds never trade. Here's what that does to the yield you see.

NSE's list of listed debt securities runs to just over 6,100 bonds. Add the gold bonds and a few older G-secs that trade but aren't on that list, and BondHunt tracks 6,218. Most of them are state government loans.

Gold bonds aren't on NSE's debt list, so we only see the 45 that traded; they're in the total but not broken out.

NSE's daily price file only includes bonds that traded that day. On 7 October that was 261 bonds. Over the whole month, 5,387 of the 6,218 had no trade at all. For a state loan the odds are worse: 95% of them didn't trade once.

So the "last price" for most listed bonds is either weeks old or doesn't exist. A screener that quietly carries old prices forward will show yields that nobody could actually deal at today.

That's why BondHunt shows only bonds that traded in the last 30 days by default, puts the date of the last trade next to every price, and greys out anything older.

Bond prices on NSE's cash market are dirty: they include the interest that has built up since the last payment. You can see it happen around every record date, when the next coupon stops belonging to the buyer and the price drops by about that amount.

Power Finance Corporation's 8.30% tax-free bond is a clean example. It closed at ₹1,088 on 25 September. Its ₹83 annual coupon had a record date of 29 September, and on that day it closed at ₹1,004.

If a yield is calculated as if that price were clean, the answer comes out wrong, worst for short bonds just before a payment. BondHunt treats NSE prices as dirty for every type of bond and counts a coupon only if a buyer settling the next working day would be on record for it.

Where bonds do trade, it's often in tiny amounts. Half of the bonds that traded on 7 October changed hands for less than ₹1.6 lakh in total, and 107 of the 261 for under ₹1 lakh. A single retail order can be the whole day's market.

That produces yields that are real arithmetic but not a real market:

• A T-bill a month from maturity trading at a price that works out to over 10% a year, while bills maturing the same week show 6–7%.
• A partly repaid NCD trading at 1.35 times its remaining face value, which implies a yield of about 1.6%.
• State loans whose last trade puts them more than 4 points above a G-sec of the same maturity.

BondHunt keeps these in the list rather than hiding them, but marks them with a !: government bonds more than 1.5 points off the G-sec curve, and other bonds outside a 4–20% range.

Before you trust any yield on a listed Indian bond, on BondHunt or anywhere else, check four things:

1. When it last traded. A yield from a trade three weeks ago describes three weeks ago.
2. How much traded. A handful of bonds is one person's order, not a market price.
3. The spread over G-secs. Compare with a government bond of the same maturity. A gap far bigger or smaller than similar bonds is a reason to look twice.
4. The rating behind it. BondHunt shows the lowest current rating across agencies, so a split rating never looks better than it is.

None of this makes a bond a good or bad investment. It just tells you whether the number on the screen is one you could actually deal at.