The nation’s burgeoning life insurance and pension fund industries, driven by an expanding middle class, are changing the landscape for India’s $1 trillion sovereign debt market. India’s yield curve has been nearly flat even amid record borrowing by the government as insurers stepped up purchases of long-term bonds.
Issuance of long-term paper was a very specific demand that has was being made to RBI for a long time, said Umesh Tulsyan, managing director at Sovereign Global Markets in Delhi. “If the response is good, RBI will definitely continue offering papers in the ultra-long segment.”
The sale of long-term bonds may help the government elongate the tenure of debt sold and keep its interest costs under control. Today’s cutoff came in lower than 7.54% yield for the 40-year paper auctioned last week.
The government plans to sell 300 billion rupees of the 50-year bond in the October to February period.
Over one-third of the government’s fiscal second-half bond supply is in papers maturing in 30-50 years. The Reserve Bank of India in September said it plans to add the 50-year bond in response to market demand for ultra-long papers, extending the nation’s yield curve.
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