Business Standard

Floating rate bonds deferred

MID-TERM MONETARY POLICY 2008-09/ Policy & Markets

Related News

The Reserve Bank of India said today that it would issue Floating Rate Bonds (FRBs) at an appropriate time factoring in prevailing market conditions.

Such instruments will help bond-holders to manage interest rate risks as returns get adjusted to market trends.

Usually, banks and primary dealers shun securities in a rising market because a rise in yields means fall in price of the bonds and results in a loss of value.

Dealers say that an FRB carries a variable coupon unlike fixed rate government bonds. These variable coupons are pegged at a spread over a fixed rate like that of the 364-day treasury bill, or the current market yield of the benchmark ten-year bond.

The Clearing Corporation of India (CCIL) is working on a new issuance and auction format structure for FRBs which will be built into the NDS current auction format.

The auction format will also help price FRBs in the secondary market. CCIL acts as a clearing corporation for government securities and money market deals routed through the RBI.

This step is part of a complete review of the current auction procedure for government securities aimed at improving efficiency.

Read more on:   
|
|

Read More

'RBI rate cut to boost SME, credit off take'

The move, according to cooperative banking leaders, would support small and medium industries and increase credit offtake

Quick Links

More news from Finance Rss icon

Banks seek changes in law for better loan recovery

To improve the loan recovery performance of banks in Odisha, the state level bankers' committee (SLBC) has urged the state finance department to ...

SKS Microfinance completes Rs 316 crore securitisation

SKS Microfinance, the only listed microfinance company in the country, has completed its first securitisation transaction of Rs 316.25 crore in ...

RBI advisor says rate cut may be possible in March

"Real interest-rates are becoming more and more positive, which would be severely disinflationary, and that means we have to cut rates," said ...

Back to Top