Buoyed by demand, banks want more long-term gilts, but RBI may not yield

Apart from long-term bonds, the market participants also requested the central bank to reduce issuance of floating-rate bonds and cap sizes of weekly primary auctions to Rs 30,000 crore

Last week, at a meeting with senior officials of the Reserve Bank of India (RBI), participants in the sovereign debt market sought more long-term papers in government bond auctions during the second half of FY23. This is owing to the high demand for such papers.

In market parlance, bonds maturing in 10 years or above are generally referred to as long-tenure securities.

However, the RBI is of the view that states — which could borrow almost double of what they raised in the first half — would also come with long-term papers. This would create a supply glut.

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