The costs of borrowing the government rise in the midst of the soothing interest regime

Fresh 10-year G-SEC cuts under old paper, somewhat | Photocredit: Designer491

The costs of borrowing the government have risen, even if the reserve Bank of India heralds a softer interest regime, whereby the market is not prepared to alleviate the proceeds. This is confirmed by the auction of the new 10-year Government Security (G-SEC/GS), performed by the RBI on Friday.

The coupon interest rate of 6.48 percent that emerged at the auction of the new 10-year G-SEC is 15 basic points higher than the coupon interest rate of the current 10-year benchmark paper (6.33 percent GS2035).

Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap LLP, noted that the closing of the new 10-year-old benchmark bond was 6.48 percent, while the outgoing benchmark (6.33 percent GS2035) traded at 6.51 percent.

“Usually a new 10-year-old should praise about 6-8 basic points under the old paper, which implies a level closer to 6.43–6.45. Instead, the spread is limited to only 3 basic points (BPS), which suggests that the market is not willing to further relieve the yield despite a very strong demand, despite a very strong question,” he said ..

Marzban Irani, CIO-FAST INCREAS, LIC investment fund, noted that the RBI Governor has laid cumuative fund cumulative by 100 basic points to 5.50 percent in the period of February 2025.

“The market has interpreted this as an indication that there may be no further cutbacks, which means that an increase in the G-SEC yields will be activated. Furthermore, the announcement of the government’s plans to rationalize GST rates led to a peak in the returns on 25 August, with the proceeds of the 10.60-year-old benchmark that he said.

Provide stabilization

The peak in the proceeds on 25 August was because of the concern that the government can borrow more to make up for the entry shortage by GST cuts, he added. From the peak of 6.60 percent, the revenues are now stabilized at 6.52 percent.

Irani emphasized that the closure (weighted average yield) at the auction of the new 10-year G-SEC was about 3 basic points lower compared to the secondary marketing of 6.51 percent of the current 10-year benchmark paper (6.33 percent GS2035).

In this respect, he noted that the market saw a silver lining in the explanation of the governor that the current macro -economic conditions and the prospects have opened policy space for further supporting growth.

The weighted average costs of G-SEC issues in FY26 so far (until 26 September 2025) with 6.6 percent were lower than the 7.0 percent in 2024-25, according to RBI’s monetary policy report.

Referring to the auction that Bids Seems worth £ 1.39 Lakh Crore at the registered amount of £ 32,000 crore, Venkatakrishnan said this underlines the appetite for the newspaper.

“Nevertheless, the returns have established, indicating that investors remain careful and want more clarity before they are marked the rates lower. The monetary policy, although it does not provide a repo reduction, was sufficient Dovish to cheer up the possibility of a reduction of December – but the auction results show that the market still praises,” he said.

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Published on October 3, 2025