RBI issues destination bonds worth Rs. 11,869 crore in government securities switch auction

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RBI government bond switch auction

Highlights

RBI issued destination securities worth a total of Rs. 11,869 crore in the switch auction in exchange for 8.26% GS 2027, 7.17% GS 2028, 7.06% GS 2028, 7.26% GS 2029, 6.03% GS 2029 and 6.79% GS 2029.
No bids were received for 6.03% GS 2029 in the auction, while other bonds saw acceptances ranging from Rs. 1,925 crore to Rs. 3,000 crore, with cut-off yields ranging from 7.3590% to 7.8391%.
Through the switch auction, the government exchanged bonds nearing maturity for longer-term bonds, improving refinancing risk management and supporting a more balanced yield curve.

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

Switch auction results and exchange of securities

As stated in the Reserve Bank of India's press release 2026-2027/1351, the switch auction involved the issuance of 7.19% GS 2060, 7.41% GS 2036, 7.23% GS 2039, 6.64% GS 2035, 7.50% GS 2034 and 7.57% GS 2033 securities in exchange for source securities including 8.26% GS 2027, 7.17% GS 2028, 7.06% GS 2028, 7.26% GS 2029, 6.03% GS 2029 and 6.79% GS 2029. The notified amounts were set at Rs. 2,000 crore, Rs. 3,000 crore, Rs. 3,000 crore, Rs. 4,000 crore, Rs. 4,000 crore and Rs. 4,000 crore, respectively.

Among the bids received, 2 offers were submitted for 8.26% GS 2027, of which 1 was accepted, with Rs. 2,000 crore of the source security accepted. For 7.17% GS 2028, 34 offers were received, of which 18 were accepted for Rs. 3,000 crore, while 11 of 12 offers for 7.06% GS 2028 were accepted for Rs. 1,925 crore. For 7.26% GS 2029, 17 of 18 offers were accepted for Rs. 2,377.18 crore, while no offers were received for 6.03% GS 2029. For 6.79% GS 2029, 14 offers were received, of which 7 were accepted for Rs. 2,000 crore.

The face value of the destination securities issued in exchange was Rs. 2,191.941 crore against 8.26% GS 2027, Rs. 3,014.193 crore against 7.17% GS 2028, Rs. 1,968.890 crore against 7.06% GS 2028, Rs. 2,509.916 crore against 7.26% GS 2029, and Rs. 1,966.176 crore against 6.79% GS 2029. No issuance was made for 6.03% GS 2029. The cut-off prices and yields of the respective destination securities were 92.32 and 7.8391%, 100.15 and 7.3867%, 98.38 and 7.4311%, 95.44 and 7.3598%, and 101.08 and 7.3590%.

Impact on debt management and the yield curve

Such switch auctions are a tool for rebalancing the Government of India's debt profile, as they push out maturity pressure by issuing longer-term bonds in exchange for securities nearing maturity. This helps the government manage refinancing risk and may lead to a more balanced distribution of securities across different maturities in the market.

The auction data also show that investor demand varied across securities. The absence of bids for 6.03% GS 2029 and differing levels of acceptance in other securities relative to the notified amounts indicate that investors remain selective based on price, yield and maturity.

Our previous report discussed the sharp increase in states' market borrowing for Q3 FY2027 and projections for State Government Securities (SGS) issuance. It highlighted gross SGS issuance, net issuance after redemptions, contributions from major states, and the expansion of the Benchmark Issuance Strategy (BIS), based on the RBI's auction calendar.

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