The maiden issuance of the 10-year Government Security (G-Sec) maturing in 2032 devolved on Primary Dealers (PDs), probably the first time this has happened with a paper, which will become the new 10-year benchmark security.

RBI devolved the 10-year paper to the tune of 42 per cent of the notified amount of ₹13,000 crore amid rising upward pressure on secondary market G-Sec yields.

Bond market players say they have not so far come across any instance of a maiden issuance of the 10-year paper being devolved by the Reserve Bank of India (RBI) on PDs.

The cut-off yield on the new 10-year G-Sec/GS came in at 6.54 per cent. The previous 10-year GS was first issued on July 12, 2021, at 6.10 per cent.

The latest Financial Stability Report has noted that the quarterly weighted average cost of incremental government borrowing has inched up in line with market benchmark yield movements.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said: “Not heard of new 10-year benchmark devolving any time. However, last year in April, the new 5-year was devolved by RBI.”.

Cancelling an auction could have given a wrong signal to the market that there is no appetite for even the benchmark bonds, he added.

Hence, RBI opted for devolvement as the 6.54 per cent level was also closer to market expectation even if the higher underwriting fees is priced in.

The auction of the other two papers -- Government of India Floating Rate Bond maturing in 2034 (aggregating ₹4,000 crore) and 6.95 per cent GS 2061 (₹7,000 crore) -- sailed through.

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