New 10-year G-sec yet to become top traded security

Only once, on August 14, did the new bond maturing 2024 and issued on July 28 have the highest trading volumes

The old 10-year government bond has continued to be the top traded security in terms of volume, even after almost a month from the date of issue of the new bond, considered the new benchmark security.

The old 10-year bond 8.83 per cent 2023, issued on November 25 last year, had emerged as the top traded security on the same day of its issue. Only once, on August 14, did the new 10-year bond 8.40 per cent 2024, issued on July 28, have the highest trading volumes, show data from Clearing Corporation of India.

R Sivakumar, head of fixed income and products, Axis Mutual Fund, said: “The previous stock 7.16 per cent 2023 was quoting at substantially below the issue price of Rs 100 at the time of auction of the 8.83 per cent 2023. Due to that, the market interest had shifted to the 8.83 per cent 2023 paper just after the auction. But in the present scenario, the 8.83 per cent 2023, as well as the 8.40 per cent 2024 paper, are trading near the issue price of Rs 100.”

According to data from the Reserve Bank of India, the amount due on the 8.83 per cent 2023 paper was Rs 83,000 crore and on the 8.40 per cent 2024 bond was Rs 20,000 crore as on this Monday. The 8.40 per cent 2024 bond was auctioned by RBI on July 25.

“The 8.83 per cent 2023 security is widely held by traders, due to which there is still trading interest in this paper,” said Badrish Kulhalli, head of fixed income at HDFC Life.

The spread or the difference in the yields of the two papers are currently at 16 basis points and the difference in the price is Rs 1.76. The old 10-year bond is trading at a premium over the issue price. “I don’t think the market will write-off the old 10-year paper so fast,” said Dhawal Dalal, executive vice-president and head of fixed income at DSP BlackRock Mutual Fund.

“The new 10-year benchmark bond 8.40 per cent 2024 is definitely the flavour of the market. This paper will be re-issued and with each auction, trading volumes will also pick up,” said N S Venkatesh, executive director and head of treasury at IDBI Bank. The 8.40 per cent paper was previously auctioned on August 14 for Rs 4,000 crore.