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Inflation-indexed bond auction subscribed 4 times

The bond has fixed real yield to maturity at 1.44% above the inflation rate, which in April was 4.89%.

June 05, 2013 3:07 IST | India Infoline News Service
The Reserve Bank of India (RBI) has completed auction of new 10 years inflation indexed Government Stock, 2023, on Tuesday.

The bonds were oversubscribed by more than four times, though RBI accepted bids worth Rs. 10 billion. The bond has fixed real yield to maturity at 1.44% above the inflation rate, which in April was 4.89%.

The interest rate was set through competitive bidding between banks, primary dealers and brokers.

These bonds offer variable interest rates based on the rate of inflation and the government is selling them as part of its efforts to wean away small investors from buying unproductive assets such as gold to hedge against India's high inflation.

The central bank had said that it would adjust interest rates on these bonds every six months based on the wholesale price index.

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