30-year sovereign green bond auction sails through
The ₹5,000 crore auction of the new Sovereign Green Bond (SGrB) of 30-year tenure sailed through on Friday. The successful auction comes in the backdrop of lacklustre response to earlier issuances of these bonds, which were of 10-years tenure.
At Friday’s auction of the SGrB, against the notified amount of ₹5,000 crore, the RBI received 98 competitive bids aggregating ₹15,160 crore and three non-competitive bids aggregating ₹1.351 crore.
The central bank accepted 31 competitive bids aggregating ₹4,998.649 crore and the three non-competitive bids aggregating ₹1.351 crore. The cut-off yield at the auction was 6.98 per cent.
Venkatakrishnan Srinivasan, Founder and Managing Partner of Rockfort FincapLLP, said, the cut-off yield at the auction of the SGrBs was in line with the secondary market yield of Government Security of similar maturity.
He observed that insurance companies and pension funds will have appetite for this (30-year) paper as they have long-term investment requirement. However, SGrBs don’t have much demand due to lack of liquidity.
The RBI had devolved the last auction (conducted on November 29) of the new 10-year SGrB on primary dealers (PDs) as investors bid for these bonds at a lower price, reflecting lack of interest in these bonds due to their relatively illiquid nature.
The lack of investor interest is also underscored by the fact that the central bank had cancelled an SGrB auction in May. Later, at the August 2 auction of these bonds, government accepted bids aggregating only ₹1,697 crore against the notified amount of ₹6,000 crore.
To make investment in SGrBs of 10-years tenure attractive, RBI last month expanded the list of specified Government securities that non-residents can invest in under the Fully Accessible Route (FAR) by including 10-year Sovereign Green Bonds (SGrBs).
The central bank designated SGrBs of 10-year tenor to be issued by the Government in the second half of the fiscal year 2024-25 as ‘specified securities’ under the FAR.