NSE launches interest rate options on govt bonds

MUMBAI: Stock exchange major NSE has launched interest rate options on 10-year government bonds to provide institutional investors ability to manage risk through a non-linear product.

“By launching interest rate options, we have added one more instrument to the fixed income derivatives asset class. Interest rate options will provide institutional investors the ability to manage risk through a non-linear product, which is otherwise not available to them,” said NSE Managing Director and CEO Vikram Limaye.

“Market participants can use options to trade and hedge interest rate risk on a transparent platform,” he said

As per the statement, interest rate options are based on the underlying government 10-year bonds - the 7.26 per cent 2029 bond and the 6.45 per cent 2029 bond. The unit of trading is set at Rs 2 lakh face value of government securities, corresponding to 2,000 units.

Currently, interest rate futures are available on seven government bonds as the underlying, for residual maturity ranging from 4 years to 15 years.

The government’s first debt ETF - Bharat Bond ETF - will be operational as it is set to open on December 12 where several PSUS will raise funds through this instrument.

Meanwhile the Bharat Bond ETF’S New Fund Offer has got the nod of market regulator Sebi and will be launched on Dec.12, sources said.

Sebi has approved the NFO of Bharat Bond ETF and it will be launched on December 12 and investors can invest in the NFO till December 20, sources said.