RBI cuts govt bonds' tenure for auction success

The Reserve Bank of India (RBI) has said the tenure of the Rs 3,000 crore government bonds has been reduced to 10 years from the earlier scheduled maturity of 20 years and above to ensure that auction on August 8 is well received.

The Reserve Bank has also opted for lower band of earlier scheduled tenure of 5-9 years for Rs 6,000 crore bonds that will carry 9.39 per cent coupon rate.

The coupon rate for the 2016 paper is 7.59%. "Like any good debt manager, it (RBI) wants to make sure that the auciton goes well," Rakesh Mohan, deputy governor of RBI said.

The RBI felt the scaled down maturities would be good to have for this auction, he said.

The Reserve Bank in a statement had said yesterday the government, in consultation, with the RBI has decided to issue securities of lower tenures - 5 years and 10 years for Rs 6,000 crore and Rs 3,000 crore, respectively.

Last month, RBI had to devolve major portions of 2016 and 2034 government bonds on primary dealers as market paricipants showed low appetite for the papers.