RBI Issues New 10-year G-Sec Paper
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(Updates 06Apr2024 12Aug2023, 17Feb2023 and 22Aug2022 are available at the end of the article)
Reserve Bank of India (RBI), India's central bank, issued a new 10-year G-Sec instrument through a government security auction on 14th of January, 2022. The effective date of this new G-Sec paper will be Monday, 17th of January 2022 and this 10-year paper will mature on 17th of January 2032.
One of the main functions of RBI is to raise public debt from the market on behalf of the Government of India and state governments. In other words, RBI is government's merchant banker.
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G-Secs (short for government securities) are bonds issued by the Central Government and State Governments in India – they carry sovereign guarantee. Basically, government securities are promissory notes issued by a government for raising money from the public and various institutional investors, like, insurance companies, banks and pension funds.
The following table shows the list of 10-year G-Secs issued by RBI in the past 14 years.
One could see from the above table, that there are occasions when RBI issues 10-year papers more than once. The 10-year G-Sec paper is considered as the benchmark for Indian bond market.
In the past 14 years, the 10-year paper was issued 22 times--three times in calendar year 2020, and twice in 2019, 2016, 2013, 2011 and 2009. The year 2020 was quite extraordinary for the bond market when RBI prevented bond yields from rising higher and higher in order to manage the dire economic situation arising out of the Corona Virus outbreak.
In 2020, RBI issued a new 10-year paper within 50 working days of issuance--which shows the RBI's desperation in controlling government bond yields.
Most of the transactions in the sovereign bond market occur in the benchmark 10-year G-Sec paper. The same can be observed from the RBI NDS-OM platform of CCIL India.
The NDS - OM (Negotiated Dealing System - Order Matching) is an electronic, screen based, anonymous, order driven trading system for dealing in Government securities. It is owned by RBI, but CCIL India maintains it. (my tweet 30Jan2018)
RBI, as Government of India's debt manager, tries every nerve to keep bond yields from rising higher. The higher the bond yields, the costlier for the government to raise debt from the market.
India 10-year bond yield movement in the past 5 years >
To sum up, how the 10-year G-Sec yields move over many months and how the RBI and the Government of India manage the bond yields is important for financial markets. As you know, the government bond yields show the price of money, which is key to both households, small and big businesses.
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P.S.: The following image is added after publishing the above article >
Update 06Apr2024:
RBI issued a new G-Sec paper 7.10% maturing 2034 effective 08Apr2024 >
Update 12Aug2023:
RBI issued a new G-Sec paper 7.18% maturing 2033 effective 14Aug2023 >
Update 17Feb2023:
RBI issued a new G-Sec paper 7.26% maturing 2033 effective 06Feb2023 >
Update 22Aug2022:
RBI issued a new G-Sec paper 7.26% maturing 2032 effective 22Aug2022 >
References:
My tweet 16Jul2021Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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Twitter @vrk100
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