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How can a bond’s bid–ask spread affect an investor’s return?

The spread creates a gap between the price available to buy and the price available to sell on the same basis.

MF Analyser EditorialPublished 26 Oct 2026 · Updated 26 Oct 2026 · IST · 1 min read · AI-assisted article

THE DIRECT ANSWER

How can a bond’s bid–ask spread affect an investor’s return?

The spread creates a gap between the price available to buy and the price available to sell on the same basis. It is an execution friction that can absorb part of interest income, especially over a short holding period. More trading hours do not automatically eliminate it.

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Explained on 26 October 2026. This is an educational answer drawn from the dated article below; examples are hypothetical unless a specific source observation is identified.

How it works

Compare the correct quantity and pricing convention, including accrued-interest treatment where relevant. The best displayed quote may cover only a small order. A yield figure without an executable exit assumption can therefore overstate what a short-term investor expects to realise.

A simple example

Assume a hypothetical same-basis purchase quote of ₹101 and sale quote of ₹99 per unit. The ₹2 difference is about 1.98% of the ₹101 purchase price, before other costs or market movement. These are teaching prices, not a live bond quote.

What to check

Use like-for-like buy and sell price bases.
Check depth for the whole intended quantity.
Include execution friction in a short-horizon comparison.

Read the full event and evidence

NSE Extends Corporate-Bond T+0 RFQ Trading: The Extra Hour Does Not Guarantee an Exit explains the original event, its dates and the supporting documents. Event context: 16 October circular; effective 19 October 2026.

Sources & supporting evidence

Read the dated documents and reporting behind this explanation.

Our source standards · Report a correction

For education and general information. This article does not provide personalized investment advice. Investments involve risk; past returns do not guarantee future performance. Check current scheme documents before acting.

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