The government will auction a new 10-year government security as part of its weekly auction, Reserve Bank of India (RBI) notified on Monday.

Out of the total weekly auction of Rs18,000 crore scheduled on Friday, the notified amount for the new 10-year paper is Rs9,000 crore.

According to bond trades, the market has already priced in illiquidity premium for the current 10-year benchmark paper, which bears 6.79% coupon and matures in 2027.

With the announcement of additional borrowing last week, there was need for a new benchmark paper as it re-anchors the yield curve and can provide some relief to the market.

Yields on government securities have been rising on worries of fiscal slippage.

Historically, new 10-year bonds have enjoyed a lower yield cutoff and aggressive demand at their maiden auction.

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