Central Idea

India is set to make history by issuing it’s first-ever 50-year government bonds and 30-year green bonds.
These offerings have piqued the interest of insurance companies and provident funds seeking avenues to invest their long-term funds.

Why such move?

Ambitious Target: India aims to mobilize ₹6.55 trillion ($78.73 billion) through bond sales from October to March. This includes a significant ₹300 billion allocation to the 50-year security, marking the central government’s maiden auction of such bonds.
Natural Demand: Long-term investors, particularly insurers, find the 50-year bonds appealing due to their alignment with asset-liability management requirements.

Government Bonds in India, fall under the broad category of Government Securities (G-Sec) and are primarily long term investment tools issued for periods ranging from 5 to 40 years.
It can be issued by both Central and State governments of India. Government bonds issued by State Governments are also called State Development Loans (SDLs).
The GB interest rates, also called a coupon, can either be fixed or floating and disbursed on a semi-annual basis.
In most cases, GOI issues bonds at a fixed coupon rate in the market.

Fixed-Rate Bonds	Offer a fixed interest rate throughout the investment tenure, providing clarity with the coupon rate mentioned.
Floating Rate Bonds (FRBs)	Subject to periodic interest rate adjustments, often with a base rate and fixed spread determined through auctions.
Sovereign Gold Bonds (SGBs)	Allow investments in gold without physical possession, with tax-exempt interest and prices linked to gold’s value.
Inflation-Indexed Bonds	Adjust both principal and interest based on inflation, using indices like CPI or WPI, tailored for retail investors.
7.75% GOI Savings Bond	Features a 7.75% interest rate and available to individuals, minors with legal guardians, and Hindu Undivided Families.
Bonds with Call/Put Option	Permit either issuer or investor to buy back or sell bonds, respectively, on specified dates, after 5 years from issuance.
Zero-Coupon Bonds	Generate earnings from the difference between issuance and redemption prices, as they do not provide interest income.

Sovereign Guarantee: Government bonds are backed by the government’s commitment, offering stability and assured returns.
Inflation-Adjusted: Inflation-indexed bonds protect investors from rising prices, maintaining the real value of their investments.
Regular Income: Government bonds provide semi-annual interest disbursements, offering investors a source of regular income.

Lower Income: Apart from 7.75% GOI Savings Bonds, government bonds typically offer lower interest rates.
Lack of Relevance: With maturity tenures ranging from 5 to 40 years, government bonds may lose relevance over time, particularly in the face of inflation.