Government will switch six short-term bonds with five longer-duration bonds
Here are details of a switch auction investors should know
The Reserve Bank of India will conduct a switch auction of dated government securities (G-secs) worth Rs. 15,000 crore on December 15, 2025. At the auction, six shorter tenure G-secs will be switched with five other longer tenure bonds.
At the auction, the government will switch three bonds maturing in 2027, having coupon rates of 8.24 per cent, 7.38 per cent, and 6.64 per cent, with three other bonds maturing in 2034 with a coupon of 7.50 per cent, 2035 with a coupon of 6.67 per cent, and 2033 with a coupon of 6.57 per cent, respectively.
The government will also switch two bonds maturing in 2028, with the coupon rate of 7.17 per cent and 8.60 per cent, with two bonds maturing in 2033, having a coupon of 7.57 per cent and 6.57 per cent, respectively.
A 2029 maturing bond with a coupon of 7.59 per cent will also be switched with a 2034 bond with a coupon of 6.19 per cent.
What is a Switch Auction
A switch auction is a debt management tool used by the government in which it typically replaces a bond maturing in the near term with a longer-duration security. In this way, the government postpones its debt repayment, thus reducing its near-term redemption pressure along with better management of its cash flow.
At the December 15 auction, the bidding and selection of bids will be done through a multiple price-based auction.
“Successful bids will get accepted at their respective quoted prices for the source and destination securities,” the RBI said.
The cut-off price of the auction is determined by the switch ratio, which is the price of the source security to that of the destination security. Those who bid at or above the cut-off ratio are considered successful bidders.
RBI has said that market participants can place their bids in the RBI’s e-Kuber platform giving the amount of source security they wish to replace and the price of the source and destination security. The auction will take place between 10:30 am and 11:30 am, and the settlement of the auction will take place the next day, on December 16.
The minimum bidding size of the auction will be Rs. 10,000 and in multiples thereafter, the RBI said. Retail investors can also participate in the switch auction through RBI’s retail direct platform in the non-competitive bids section, or through the exchanges.
“There is a lot of redemption pressure till the end of FY27, so the switch auction is targeting to reduce that pressure,” a bond dealer at a private sector bank who did not wish to be named, said.
“This auction will not impact market prices much because most of the destination securities are offered within the 10-year maturity. But demand for short-term bonds (maturing up to five years) could remain firm because of the lower supply pressure,” the dealer added.
