SEBI Mandates Mutual Funds to Value ‘AT-1 Bonds’ Based on ‘Yield to Call’ as Per NFRA Recommendation
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- Last Updated on 7 August, 2024
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Circular No. SEBI/HO/IMD/PoD1/CIR/P/2024/106, Dated 05.08.2024
Earlier, the National Financial Reporting Authority (NFRA) recommended that since AT-1 bonds in the market tend to trade at or close to their Yield to Call (YTC) prices, these bonds should be valued on a Yield to Call basis. This approach aligns with the market-based measurement principles under Ind AS 113 (Fair Value Measurement).
NFRA further clarified in its report that this recommendation on the YTC methodology only pertains to interpreting Ind AS 113 for valuing AT-1 bonds and does not address the issue of deemed maturity dates for other purposes, as that is outside NFRA’s remit. As a result, SEBI has now specified that Mutual Funds must value AT-1 Bonds based on Yield to Call.
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