The Reserve Bank of India (RBI) said on Monday that it would raise Rs 8,000 crore through a new benchmark 10-year bond on Friday.
This is part of the Rs 14,000-crore bond auction the central bank would be undertaking on Friday, including Rs 2,000 crore through a 40-year bond. The 40-year bond, the longest duration bond, was issued in October last year and only Rs 5,000 crore has been raised so far. The other bonds against which Rs 2,000 crore each will be raised will mature in seven years and eight years, respectively.
Against the existing 10-year benchmark bond maturing on May 25, 2025, Rs 86,000 crore has been raised.
The bond closed at 7.733 per cent on Monday, flat from its previous close of 7.73 per cent. For the time being, this bond will continue to be treated as the benchmark, even though technically it is a nine-year bond, as the new bond will need more liquidity for price discovery to take place.
RBI had said on December 31, 2015 that it would extend the average maturity period of bonds through switches and buyback, even as it would continue to issue bonds in the maturity basket of five to 10 years as this is the most traded segment.