Reserve Bank of India has announced an interest rate of 6.97% for the Floating Rate Bond 2024
The Reserve Bank of India (RBI) announced on May 4 that the interest rate on the Government of India’s Floating Rate Bond 2024 (FRB 2024) will be 6.97 percent for the period from May 7, 2023 to November 6, 2023.
“It is to be recalled that the interest rate on the FRB 2024 will be reset to the average rate (rounded to two decimal places) of the implicit yields at the cut-off prices of the last three auctions of Government of India 182-day Treasury Bills held up to the period preceding the coupon reset date, which is May 07, 2023. “The implicit yields will be calculated using 365 days in a year,” the RBI stated in a statement.
Floating Rate Bonds are securities whose coupon rate is not fixed. They have a variable coupon rate that is reset at intervals that have been announced.
The FRB bonds bear a coupon with a base rate equal to the weighted average yield of the three most recent auctions of 182-day Treasury Bills (T-Bill) plus an auction-determined fixed spread.
Government bond yields rose today, with the benchmark bond yield surpassing 7%, following a debt auction where demand was weaker than anticipated, which prompted selling and dampened market sentiment.
The benchmark 10-year 7.26% 2033 bond yield closed at 7.0140%, up from 7.0057% on Wednesday. Earlier in the day, the yield fell to 6.978 percent, its lowest level since April 8, 2022.
After the US Federal Reserve hinted at a pause following a widely anticipated 25 basis point rate increase, bond yields began the day lower.
The difference between the benchmark 10-year bond yield and the RBI repo rate briefly fell below 50 basis points, the lowest level since September 2017.
However, the yield concluded the holiday-shortened week 11 basis points (bps) lower after declining by 7 and 4 bps in the prior two weeks.
