The Hindu Business Line : RBI floating rate bonds sale on Sept 9

The sale by re-issue of the "6.65 per cent Government Stock 2009" and the "8.35 per cent Government Stock 2022" will be for a notified amount of Rs 3,000 crore each.

Both auctions will be price-based using multiple price auction method, the release said.

The floating rate bonds will be of 9-year tenure and will be issued at par, i.e., at Rs 100.

The bonds will carry an interest rate, which is calculated by adding a `spread' to a variable base rate. The `spread' will be decided in the auction to be conducted by the Reserve Bank of India and will remain unchanged during the currency of the bonds.

The variable base rate will be the average rate of the implicit yields at cut-off prices emerging in the immediate previous three auctions of `Government of India 364 day Treasury Bills' held prior to the relative annual coupon reset period. The interest will be paid every half year, said the release.

The base rate for calculation of interest for the first coupon period commencing from September 10, 2004 to September 9, 2005 as per the formula is 5.02 per cent per annum. The RBI will announce the base rate for the subsequent annual coupon periods, worked out as per the formula, on or before the commencement of the respective coupon reset period.

Up to 5 per cent of the notified amount of the sale of the bonds and stocks will be allotted to eligible individuals and institutions as per the scheme for non-competitive bidding facility in the auction of Government securities, said the release.

On the basis of bids received, the RBI will determine the maximum spread and minimum price for the floating rate bonds or the Government stocks up to which offers will be accepted.