In the switch auction of Government of India securities, the RBI issued bonds for 2034-2039

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Government Bond Switch Auction

Highlights

RBI issued a total of eight series of bonds in the switch auction, with the notified amount ranging from ₹4,000 crore to ₹5,000 crore.
The cut-off yields were set at 6.8809% for 7.50% GS 2034, 6.8995% for 6.67% GS 2035, and 7.1890% for 6.92% GS 2039.
Through the auction, the government converted short-term debt into long-term securities, which extended the maturity profile and benefited debt management.

This article was translated from the original. Read the original version by our correspondent here.

Switch Auction Results and Allocation

According to the press release from RBI, in exchange for 6.79% GS 2027, 6.64% GS 2027, 8.60% GS 2028, and 7.37% GS 2028, the following securities were issued respectively: 7.50% GS 2034, 6.67% GS 2035, 6.22% GS 2035, and 6.92% GS 2039. The notified amounts for these four source securities were ₹4,000 crore, ₹4,000 crore, ₹3,000 crore, and ₹4,000 crore, respectively.

The number of bids received in these categories was 13, 4, 17, and 22, respectively, while the accepted bids were 4, 1, 2, and 21. The total face value of accepted source securities was ₹1,347.901 crore, ₹170.620 crore, ₹800.000 crore, and ₹3,390.296 crore, respectively, against which the face value of issued destination securities was ₹1,307.979 crore, ₹174.745 crore, ₹871.184 crore, and ₹3,555.800 crore, respectively.

The cut-off price and yield levels were also announced. For 7.50% GS 2034, the cut-off was ₹103.80 and 6.8809%; for 6.67% GS 2035, ₹98.42 and 6.8995%; for 6.22% GS 2035, ₹95.64 and 6.8897%; and for 6.92% GS 2039, ₹97.70 and 7.1890%.

Maturity Profile and Market Impact

In the second group, in exchange for 7.26% GS 2029, 7.59% GS 2029, 7.04% GS 2029, and 7.88% GS 2030, the following securities were issued respectively: 6.64% GS 2035, 7.50% GS 2034, 6.33% GS 2035, and 6.64% GS 2035. The notified amounts for these source securities were ₹2,000 crore, ₹4,000 crore, ₹4,000 crore, and ₹5,000 crore, respectively.

The number of bids received for these four securities was 32, 7, 11, and 31, respectively, while the accepted bids were 24, 1, 9, and 19. The total face value of accepted source securities was ₹2,000.000 crore, ₹13.748 crore, ₹931.125 crore, and ₹4,053.100 crore, while the face value of issued destination securities was ₹2,082.692 crore, ₹13.692 crore, ₹984.063 crore, and ₹4,308.482 crore, respectively.

The cut-off levels for these allocations were ₹98.21 and 6.9104% for 6.64% GS 2035, ₹103.80 and 6.8809% for 7.50% GS 2034, ₹96.44 and 6.8705% for 6.33% GS 2035, and ₹98.21 and 6.9104% for 6.64% GS 2035. This switch auction helps shift the government’s liability profile towards long-term securities and aids in managing near-term maturities.

Our previous report discussed the measures taken by the government and RBI to attract foreign capital, which included tax exemptions/reductions on government bonds for FPIs, expansion of the Fully Accessible Route, and steps to increase foreign exchange liquidity. The article noted that these initiatives could ease pressure on the balance of payments and banking funding, although they are considered partial relief compared to the required capital inflows.

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