Govt to launch 40-year bonds in first half of FY2016

At present, Indian G-sec yield curve spans 30 years and there is demand for 20-year paper from insurers and provident funds

The government is planning to introduce long-term bonds of 40 years maturity in the first half of the current fiscal with small issuance size, Parliament was informed today.

"It is proposed to introduce a long tenor bond of 40 years maturity in H1 of 2015-16," Minister of State for Finance Jayant Sinha said in a written reply to Lok Sabha.

"In the backdrop of very flat yield curve, the cost may not be much higher than the 30 years security," he added.

The bonds of long tenure of 40 years are being planned in view of the elongation of maturity of the portfolio which is preferred to limit rollover risk and is internationally followed in the advanced economies, he said.

At present, the Indian G-sec yield curve spans 30 years and there is reasonable demand for bonds having maturities above 20 years from insurance companies and provident funds seeking to hedge long-term liabilities.

He was replying to a question whether government has any proposal to launch long-term bond of 40 years maturing to grab the attention of insurers and pension funds.

"These investors have evinced interest in 40-year bonds," Sinha said.

He added that the initial issuance of such instruments in small size would also help to gauge the quantum of demand for these bonds and the size can be increased or decreased based on experience.