On Monday, the Finance Ministry announced that government bonds worth Rs 34,000 crore are to be auctioned in three different lots with Reserve Bank of India auctions being held in Mumbai on Friday, February 21.
The first tranche has the "6.75 percent Government Security 2029" notified amounting to Rs 14,000 crore. The second tranche comprises the "6.98 percent GOI SGrB 2054" at a notified size of Rs 5,000 crore.
The third tranche has the "7.34 percent Government Security 2064" at Rs 15,000 crore. These securities are to be sold through price-based auction employing the multiple price method, as stated in the announcement.
Also, the government has the option to accept additional subscriptions of a maximum of Rs 2,000 crore each for all the securities listed, the statement added.
According to the Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities, up to 5 percent of the total value of each sale of the securities will be reserved for eligible individuals and institutions.
Both competitive and non-competitive offers for the upcoming auction need to be made through the Reserve Bank of India Core Banking Solution (E-Kuber) system on February 21. Non-competitive offers have to be placed between 10:30 a.m. and 11:00 a.m., while the competitive offers must be placed from 10:30 a.m. to 11:30 a.m., according to the official statement.
The auction outcome will be announced on February 21, and the payment from successful bidders must be made by February 24 (Monday).
The securities will be eligible for "When Issued" trading, as per the Reserve Bank of India's instructions on 'When Issued transactions in Central Government Securities,' as specified in circular No. RBI/2018-19/25 dated July 24, 2018, and its amendments, the statement added.
Government bonds are debt that the government issues and sells to investors to finance its spending. Government bonds are a secure investment because they are guaranteed by the government. Because they are relatively low-risk, government bonds tend to have lower interest rates.
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