The Indian government has announced a significant buyback of government securities (G-secs) totaling ₹25,000 crore, a move aimed at managing its debt portfolio and bolstering the financial system. This announcement, made by the Reserve Bank of India (RBI), involves the repurchase of various G-secs with different coupon rates and maturity dates spanning from 2024 to 2026.
Buyback Details
The securities included in this buyback feature a variety of coupon rates and maturity dates:
- 7.72% coupon rate – maturing on May 25, 2024
- 5.22% coupon rate – maturing on June 15, 2024
- 8.2% coupon rate – maturing in September 2024
- 5.15% coupon rate – maturing on November 9, 2024
- 7.59% coupon rate – maturing on January 11, 2026
The buyback auction is scheduled for October 17, 2024, and will utilize a multiple-price method. Bids must be submitted electronically via the RBI’s E-Kuber system between 10:30 AM and 11:30 AM on the auction date. Results will be announced the same day, with settlement set for October 18, 2024.
Rationale Behind the Buyback
This buyback is part of a larger strategy to manage the government’s debt more effectively. By repurchasing bonds before their maturity, the government can reduce its debt servicing burden and interest payments associated with higher coupon-rate bonds. This strategy helps smooth out the redemption profile, avoiding significant repayments soon and contributing to market liquidity, which stabilizes interest rates.
Treasury Bills Auction Announcement
In conjunction with the G-secs buyback, the RBI has also announced an auction for Government of India Treasury Bills (T-Bills), totaling ₹19,000 crore. The details of the T-Bill auction are as follows:
- 91-Day T-Bills: ₹7,000 crore
- 182-Day T-Bills: ₹6,000 crore
- 364-Day T-Bills: ₹6,000 crore
This auction is set to take place on October 16, 2024, with settlement scheduled for the following day.
Participation for Investors
Individual investors interested in the G-securities market can participate through the RBI Retail Direct portal or app, which enables direct investment in government securities without intermediaries. To engage in G-securities trading, investors need to open an RBI Retail Direct Account. Once registered, they can log in to their accounts to participate in auctions or invest in securities available in the secondary market.
Important Auction Process Notes
- The RBI reserves the right to modify auction amounts and timings based on government needs and market conditions.
- Treasury Bills are zero-coupon securities issued at a discount, redeemable at face value upon maturity.
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