India sets maximum underwriting fee for 2040 bond at 1.07 paisa

India sets maximum underwriting fee for 2040 bond at 1.07 paisa

India’s government has executed a bond switch operation, replacing securities maturing in fiscal year 2026-27 with longer-dated 2040 bonds to manage near-term debt redemption pressures. The government repurchased 755.04 billion rupees ($8.34 billion) of shorter-term bonds from the Reserve Bank of India (RBI) and issued 694.36 billion rupees of the 8.30%, 2040 bond in exchange. This move, part of routine debt management strategies, aims to align borrowing costs with market conditions and ease liquidity constraints in the upcoming fiscal year. The 2040 bond was issued at a price of 110.45 rupees, while the buyback prices for the shorter-term bonds ranged between 100.28 and 102.46 rupees.

Separately, the government has set a maximum underwriting fee for the 2040 bond at 0.23 paise, according to a report from August 2025. This contrasts with earlier expectations in January 2026, when traders anticipated an underwriting fee of 0.73 paisa for a benchmark bond issuance targeting 320 billion rupees ($3.48 billion). The discrepancy highlights varying fee structures across different bond maturities and instruments.

With planned borrowing of 17.2 trillion rupees for 2026-27—17% higher than the current fiscal year— the government is leveraging tools like bond switches and underwriting fee adjustments to manage market stability and borrowing costs. These measures aim to mitigate potential spikes in yields amid record borrowing needs.