The Reserve Bank of India has decided to introduce a new 10-year Government Security (G-Sec), which will become the benchmark paper, through which the government will borrow ₹14,000 crore at the upcoming auction on Friday.
This announcement was expected by market participants as the outstanding limit in the current 10-year G-Sec/GS (coupon rate: 5.85 per cent) has reached about ₹1.20-lakh crore. At this level of outstanding amount, usually, a new 10-year G-Sec is issued.
Moreover, the RBI has mopped up about three-fourth of the 5.85 per cent GS via its G-Sec Acquisition Programme and special open market operations, and the trading volume in this paper has been gradually drying up.
Since the 5.85 per cent 2030 GS was first issued on December 1, 2020, its yield has jumped about 25 basis points to close at 6.0877 per cent on Monday, with the price declining about ₹1.82 to ₹98.31.
Overall, the government will be borrowing ₹26,000 crore on Friday through auction of the 4.26 per cent GS 2023 (₹3,000 crore), New GS 2031 (₹14,000 crore) and 6.76 per cent GS 2061 (₹9,000 crore). It will also have the option to retain additional subscription up to ₹6,000 crore against the above security/securities.
G-SAP 2.0 on July 8
A day prior to the auction of the aforementioned G-Secs, the RBI will be purchasing five G-Secs aggregating ₹20,000 crore under its G-Sec Acquisition Programme (G-SAP 2.0) on July 8.