India's central bank said on Monday it will offer a new 10-year government bond on Friday, with the issuance size set at 340 billion rupees ($3.58 billion). The security, which matures in 2036, is intended to become the country's new benchmark paper in the coming weeks.
The existing benchmark is the 6.48% 2035 bond, which currently has an outstanding amount of 2.26 trillion rupees. Market participants will watch the Friday auction closely as the new 2036 bond is phased into benchmark status.
Benchmark yields were steady on Monday, with the 10-year closing at 7.0194%, a level that showed little change from the prior session. Trading during the day was choppy as market participants grew cautious in response to rising geopolitical tensions in the Middle East and increases in oil prices after reports that a missile attack struck a U.S. warship in the Strait of Hormuz. Those developments weighed on sentiment for parts of the trading day.
At the same time, the results of state elections provided some support to the domestic market, according to market commentary. Overall, the benchmark yield has climbed 36 basis points since the onset of the Middle East war on February 28.
The planned 340 billion-rupee sale will be one step in establishing the 2036 issue as the reference point for government debt. Traders and portfolio managers typically track benchmark paper closely because it serves as a pricing reference across the broader fixed-income market.
With yields around the 7.02% area and the new security scheduled to be issued on Friday, market attention will be on demand at the auction and how the new 2036 bond is absorbed relative to the existing 2035 benchmark.
Summary - India will auction a new 10-year bond maturing in 2036 on Friday for 340 billion rupees. The security is expected to become the country's next benchmark, replacing the 6.48% 2035 bond, while benchmark yields held near 7.0194% on Monday amid geopolitical and oil-price pressures.