50-year bond ends life insurers’ wait

The central government has introduced a new dated security of 50-year tenor in its borrowing calendar for the second half of the current financial year—a long-standing demand by life insurance companies, particularly Life Insurance Corporation of India.

"In response to market demand for ultra-long duration securities, it has been decided to introduce a new dated security of 50-year tenor," the Reserve Bank of India (RBI) said while issuing the borrowing calendar for the second half of the financial year.

Market participants said that the Rs 30,000 crore supply in the 50-year bond will be absorbed by the insurance companies.

"The 50-year bond was introduced because there was a kind of demand from the insurance companies," Churchil Bhatt, executive vice president at Kotak Life Insurance said. "The demand will be largely from the insurance sector," Bhatt added.

The central government's borrowing amount of Rs 6.6 trillion for the second half of the current financial year was along the expectations of the market, dealers said.

"Borrowings are as per budgeted numbers, good to declare in advance so that quarter-end positions can be adjusted accordingly. Auction to be over in mid-February 2024, so easing pressure on yield in the last quarter as by that time repo rate decisions will be more predictable. Green bonds in 5, 10, and 30 years to be issued for Rs 20,000 crore. Huge redemption in H2 will be better for yields," Arun Bansal, executive director head of treasury at IDBI Bank, said.