RBI launched another new 10-year benchmark bond this year. This has been done as the previous issue reached Rs. 1 trillion in outstanding. As per bond dealers, a quick benchmark setting can generate some confusion in the markets on rates. When the outstanding comes close to Rs 1.2 trillion, people may not take positions on existing bonds fearing issues will stop.

The RBI generally stops issuing a bond once the total outstanding amount reaches approximately Rs 1.2 trillion. Considering the enhanced government borrowing this year, we have had a third 10-year benchmark issue this year. The frequent change in the 10-year benchmark has led to a reduction in the 'premium' that the benchmarks have been enjoying earlier," said Badrish Kulhalli, head of fixed income at HDFC LIfe Insurance.

On Friday, the government against the new issue raised a total of Rs. 8000 crore at a coupon rate of 5.85 percent, which was part of the Rs. 28000 crore bond auction conducted on Friday.

The most-traded ten-year bond yields closed at 5.91 percent even as gross domestic product (GDP) numbers, released later in the evening, showed the economy contracted 7.5 percent in the second quarter. The coupon of the new bond has been slightly higher than earlier. The government's Rs 12 trillion borrowing programme has been undertaken at 10-year low yields.
 

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