Business News/ Mutual Funds / RBI announces 6.97% interest rate on Floating Rate Bond 2024

The Reserve Bank of India (RBI) on May 4 announced a 6.97 percent interest rate on the Government of India's Floating Rate Bond 2024 (FRB 2024) applicable for the half year May 07, 2023 to November 06, 2023.

“It may be recalled that the rate of interest on the FRB 2024 shall be reset at the average rate (rounded off up to two decimal places) of the implicit yields, at the cut-off prices of the last three auctions of Government of India 182-days Treasury Bills, held up to the period preceding the coupon reset date, which is May 07, 2023. The implicit yields will be computed by reckoning 365 days in a year.," the RBI said in a release.

Floating Rate Bonds are securities that do not have a fixed coupon rate. They have a variable coupon rate which is re-set at preannounced intervals.

The FRB bonds carry a coupon with a base rate equivalent to a weighted average yield of the last three auctions of 182-day Treasury Bills (T-Bill) plus a fixed spread decided by way of auction.

Seprately, the government bond yields ended higher today, with the benchmark bond yield above 7%, after weaker-than-expected demand at debt auction triggered selling and dented market sentiment.

The 10-year benchmark 7.26% 2033 bond yield ended at 7.0140%, after closing at 7.0057% on Wednesday. Earlier in the day, the yield had dipped to 6.9786%, lowest since April 8, 2022.

Bond yields began the day lower after the US Federal Reserve hinted at a pause following a widely-expected 25 bps rate hike.

The spread between the 10-year benchmark bond yield and the RBI repo rate briefly fell below 50 bps, the lowest since September 2017.

The yield, however, ended 11 basis points (bps) lower in a holiday-truncated week, after easing by seven and four bps in the previous two weeks.

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Updated: 04 May 2023, 09:07 PM IST
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