India Debuts Its 50-Year Bond At 7.46%

India on Friday debuted its first-ever 50-year bond at a cut-off yield of 7.46%. This is part of the government's reorganisation of its borrowing profile.

Prior to this, India's longest tenor government bond was the 40-year paper. The cut-off yield on that is close to 7.47%. According to an official in the know, the yield shows that there has been significant interest for the 50 year paper.

The government plans to raise Rs 6.55 lakh crore in the second half of the current financial year as part of its stated borrowing plan. The 50-year bond will be used to raise 4.58% of this target, the government had disclosed in September.

This new paper is likely to see significant interest from long-duration investors, experts said.

“Insurance companies would need long-tenure bonds for their asset liability management,” Ashish Vaidya, head of treasury and markets at DBS Bank India told BQ Prime. “Every bond has a different investor base…there would be demand for the 50-year bond in my view.”

Amit Shewale, an independent macrotrader based out of Mumbai, also echoed the view.

“Historically, government is trying to elongate its average maturity,” Shewale told BQ Prime. “But because of the crisis, the appetite from regular investors has been on shorter-dated bonds. They were not able to elongate their average maturity…" he added.

With the 50-year bond in play, the government will be assured of a longer-term stable investment segment, Shewale said.