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Fixed Income

Govt. to borrow 287,000 cr. in next 6 months

RBI has put the borrowing calendar of GSecs for April-September 2010. The total borrowing is slated to be 287,000 cr. with 11,000 to 15,000 crores borrowed every single week. The current 10 year yield is about 7.74% and with the kind of supply coming up, will it cross 8% again? (It briefly crossed 8% and then went back down)

Note for people who want long term income at 8.5% to 9% buying a longer term government bond direct from the government is probably a great option, better than buying an annuity from any insurance company. (More: Low Annuity Returns in India)

RBI has also noted they’ll be selling treasury bills – securities which are between three months to a year in maturity – of 109,000 cr. The interest on this is obviously lower (order of 4%) and is usually bought by banks and FIs. There’s nothing unusual about this – standard short term operations.

  • Sri says:

    >How does one go about buying these long term bonds? Do you have a rule of thumb to determine at which point any management hassles make it not worthwhile, e.g. capital < 1 Lakh, < 5 Lakhs etc.,?

  • Deepak Shenoy says:

    >10K per bond is the lot size to speak, so any account with min 10K works. Multiples of 10K approx, per bond. And no more hassles than owning a demat account. Only issue is the procedure for creating an SGL account – but any gilt dealer can help with that (IDBI Gilts, PNB Gilts, ICICI Bank, Canara Bank etc.)