The new 10-year G-Sec, which will mature on May 2, 2035, will become the new benchmark paper after a few auctions
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FRANCIS MASCARENHAS

With the outstanding issuance of the benchmark 10-year Government Security (G-Sec) reaching ₹1.84 lakh crore, the RBI has decided to introduce a new G-Sec through an auction it will conduct on May 2. The coupon rate on this paper is likely to come in around 6.30 per cent., according to market experts

The new 10-year G-Sec, which will mature on May 2, 2035, will become the new benchmark paper after a few auctions. The government will be raising ₹30,000 crore via the new GS 2035 at the upcoming weekly auction on Friday.

The current 10-year benchmark (6.79 per cent GS 2034) was introduced on October 7, 2024 when the outstanding in the previous 10-year G-Sec (introduced on April 7, 2024) reached ₹1.80 lakh crore.

Market players expect the coupon rate on the new paper to come in 2-3 basis points lower than the prevailing secondary market yield of the existing 10-year benchmark (6.79 per cent GS 2034).

Yield of the current 10-year benchmark softened about 7 basis points (or price rose about 50 paise) on Tuesday to close at 6.33 per cent against previous close 6.40 per cent. Going by today’s closing yield, experts see the coupon rate on the new GS to be around 6.30 per cent level.

The G-Sec market was buoyed on Tuesday as RBI announced an auction calendar for open market operation (OMO) purchase of G-Sec for May 2025 aggregating ₹1.25 lakh crore in four tranches. This move will inject liquidity into the banking system.

OMO purchase auctions

The RBI has been conducting OMO purchase auctions since late January 2025 to infuse liquidity into the banking system. Liquidity in the system turned into deficit in Q4FY25 mainly due to seasonal increase in currency in circulation and RBI’s forex operations.

However, system liquidity turned into surplus since late March with the surplus currently at about ₹90,000 crore at the last count on April 26.

System liquidity turned into surplus since March 29, 2025, after a gap of over three months on account of RBI’s liquidity augmenting measures (through a combination of OMO purchases, longer-duration variable rate repo auctions and forex swaps) along with the usual drawdown of government cash balances in the month-end, according to RBI’s latest monthly bulletin.

Published on April 29, 2025