Demand for long-term bonds likely to taper on weak insurer interest

Long-term government bonds might bear the brunt of declining demand from insurance companies, and the prices of these papers could fall, according to dealers. Typically, insurance companies invest in long-term papers that suit their asset-liability management needs.

Bond prices and yields move inversely.

In the Union Budget for FY24, the government proposed to tax income from high-value life insurance policies, other than unit-linked insurance plans. Tax was imposed on life insurance policies with annual premium exceeding Rs 5 lakh per year. The tax regime was effective from April 1, 2023.

As a result, there was heavy buying of such policies