India is poised to issue a new 10-year bond with a coupon rate expected to exceed 7 percent for the first time in two years, driven by inflationary pressures and challenges in global markets, analysts indicate.
On Friday, the Indian government plans to sell 340 billion rupees (approximately $3.57 billion) of this new 10-year bond, which will replace the existing benchmark 6.48 percent 2035 bond, currently yielding 7.05 percent.
The new bond traded at a yield of 7.00 percent in the when-issued segment on the trading platform. Analysts believe that if crude oil prices remain high, in the range of $115 to $120 per barrel, upward pressure on yields will continue. Harsimran Sahni, head of treasury at Anand Rathi Global Finance, stated, “With the current benchmark yield trading above 7.00 percent, the coupon on the new 10-year issuance is expected to be set in the range of 7.00 percent to 7.02 percent.”
The Reserve Bank of India last offered a 10-year bond above 7 percent in April 2024. Historically, bond traders have shown strong interest in new benchmark bonds to incorporate them into their portfolios. Alok Singh, head of treasury at CSB Bank, emphasized, “We expect good demand for the new paper as it is a fresh issuance on the current yield curve and does not carry any mark to market risks, but the cutoff should be closer to the current security.”
The outstanding issuance of the 2035 bond is currently 2.26 trillion rupees, the largest for any 10-year debt issuance to date.
