Business Standard

Going long on the bond street

For financial intermediaries globally, interest rate risk seems to be higher than credit risks, of loans turning non-performing assets, at this point. Fortunately, India is a different story

bond
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Tamal Bandyopadhyay
India’s first 50-year bond, issued earlier this month, is a resounding success. Insurance and pension funds rushed to lap up the ultra-long paper. The Rs 10,000 crore 2073 paper’s cut-off yield at the auction was 7.46 per cent, lower than what a Bloomberg survey had forecast — 7.48 per cent. As I write this column, the yield of this paper is veering around 7.42 per cent.

Prices and yield of a bond move in reverse directions. This means, if the yield rises, the prices drop and investors lose out. With the Reserve Bank of India (RBI) allowing commercial banks to hold
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

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