The Government on Friday issued a new 10-year Security (G-Sec) at a cut-off yield of 7.18 per cent at the weekly auction. This is eight basis points (bps) lower than the 7.26 per cent coupon rate of the current 10-year benchmark G-Sec.
What this means is that the Government’s cost of borrowing via the 10-year paper has come down by eight bps, according to Marzban Irani, CIO-Fixed Income, LIC Mutual Fund.
The Government raised ₹14,000 crore through auction of the new 10-year G-Sec, which matures in 2033.
The cut-off yield on the new G-Sec was in line with secondary market yield of the prevailing benchmark 10-year paper (7.26 per cent GS2033), said Rama Chandra Reddy, Head-Treasury, Karur Vysya Bank.
The Government pays coupon (interest rate) on the face value (₹100) of the G-Sec on half-yearly basis.
The new issuance of 10-year paper comes in the backdrop of the outstanding in the 7.26 per cent GS 2033 touching ₹1.48 lakh crore. Usually, the Government issues a new G-Sec once the outstanding in a G-Sec touches about ₹1.50 lakh crore.
Besides raising monies via the new G-Sec, the Government also raised ₹8,000 crore via auction of 7.06 per cent GS 2028 at a cut-off yield/ price of 7.1848 per cent/₹99.50 and ₹11,000 crore via auction of 7.30 per cent GS 2053 at a cut-off yield/ price of 7.3949 per cent/₹98.85.