India is set to make its first-ever issuance of 50-year government bonds as part of its plan to raise 26.55 lakh crore in market borrowings in the second half of the fiscal year ending in March 2024; government to also sell 30-year green debt securities.

Long-term parking

India’s 50-year bonds are set to be easily absorbed by insurers, pension funds looking for instruments to park long-term funds

Most insurers require longer duration bonds for their asset-liability management, says Kotak Mahindra Life’s Bhatt.

Current 40-year bond seen as the anchor for pricing the new ultra-long government securities.

Govt. aims to raise 76.55 lakh crore through the sale of bonds in the October-March period.

India’s first-ever issuance of 50-year goIvernment bonds and 30-year green bonds can be easily absorbed by insurance firms and provident funds, which are keen and have been looking for ave- nues to park long-term funds, officials said.

The government aims to raise 6.55 lakh crore through the sale of bonds in October-March. This would include 30,000 crore of the 50-year security, the first such auction by the central government.

“Long-term investors like insurers will have a natural demand for the 50- year paper. Most insurance companies require longer- duration bonds for their as- set-liability management,” said Churchil Bhatt, executive vice president at Kotak Mahindra Life Insurance.

“The insurance sector requested the 50-year paper’s issuance,” he said, ad- ding that the anchor for its pricing would “naturally be the current 40-year bond”. Other market participants like provident funds and pension funds were also likely to actively participate in the bond auction, traders said.

The government also reintroduced green bonds for the second half. It aims to raise 20,000 crore through such notes, half of which would be through the new 30-year papers.
“There are few public sector (companies) issuing longer-term bonds,” said Rahul Bhuskute, chief investment officer at Bharti AXA Life Insurance.

“New avenues like longer-term green bonds would be of some comfort to insurance companies in terms of regulatory com- pliance with investments in their desired duration.”

Sampath Reddy, CIO at Bajaj Allianz Life Insurance, said they invested in green bonds earlier and may choose to invest more in the second half as supply comes up.

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