On August 11, the Reserve Bank of India (RBI) established a coupon rate of 7.18 per cent for the recently introduced 10-year government securities set to mature in 2033, following the weekly bond auction.
This coupon rate aligns with market anticipations, with money market dealers estimating the new benchmark bond's coupon to fall within the range of 7.10 per cent and 7.20 per cent. Notably, it stands eight basis points lower than the coupon rate for the preceding 10-year bond, which had been set at 7.26 per cent.
For reference, a single basis point corresponds to one-hundredth of a percentage point.
According to an official release, the central bank accepted the full amount of ₹14,000 crore concerning the newly introduced 2033 bonds.
Regarding the 2028 bonds at 7.06 per cent, the cut-off price or yield was set at ₹99.50, equivalent to a yield of 7.1848 per cent. Additionally, for the 2053 bonds at 7.30 per cent, the cut-off price or yield was established at ₹98.85, equating to a yield of 7.3949 per cent, as outlined in the central bank's release.
Furthermore, the RBI delineated the cut-off rates for underwriting commission payable to primary dealers, setting them at 26 paise for the 7.06 per cent GS 2028, 36 paise for the new 2033 bond, and 67 paise for the 7.30 per cent GS 2053.
As for the current benchmark bond, the 7.26 per cent 2033 bond, its yield stood at 7.1863 per cent.
The central bank unveiled the new 10-year government securities, which are set to mature in 2033, on August 7.
This revelation of the fresh benchmark bond had been anticipated, considering that the present 10-year benchmark bond, the 7.26 per cent 2033 bond, has accrued an impressive outstanding amount of ₹1.5 lakh crore, as per data provided by the central bank.
Government-issued bonds serve as a means for borrowing funds from the market to finance its expenditures. These bonds are issued with varying tenures, spanning from three years to as long as 40 years.
