Indian insurers bought a majority of the government’s first-ever auction of ultra-long bonds, with around half of the issue subscribed by a large state-run insurance company, reported Reuters quoting traders.
On 3 November 2023, the government sold INR100bn ($1.2bn) of 50-year bonds, its longest maturity, with a 7.46% coupon.
“It is likely that a large state-run insurer has cornered half of the stock. This is not even surprising and, looking at the cutoffs and overall bid book, this seems a plausible argument,” a senior treasury official with a primary dealership told Reuters.
The 50-year bond saw bids worth INR402bn, with a bid/cover ratio of over four times, compared with a ratio of only around 2.5 times for the liquid five- and 10-year bonds, RBI data showed.
Traders expect the remaining two auctions of the bonds to also be well-received and the paper to become a part of regular auctions in coming years, amid rising appetite from insurance companies.
Before this, the government used to sell only 30- and 40-year bonds. However, insurers and pension funds needed longer tenors to fulfil some of their long-term commitments.
