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Bourses to launch new govt bond futures on Friday

Leading stock exchanges BSE and NSE will introduce new interest rate futures (IRF) contracts on Friday based on the government bonds maturing in 2023 and 2029.

IRF contracts based on 7.68 percent central government security maturing on December 15, 2023 and another IRF contract based on 7.59 percent government bond maturing on March 20, 2029 would be made available for trading from Friday, November 27, 2015, the two exchanges said in separate circulars.

An IRF is generally a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing asset such as government bonds.

The cash-settled IRFs provide market participants with the option to hedge risks arising from fluctuations in interest rates, which depend on various factors, including the Reserve Bank policy, demand for liquidity and flow of overseas funds.

The IRF market gets participation from retail investors, trading houses, FIIs (Foreign Institutional Investors), mutual funds and insurance companies.

The exchanges in July had introduced IRF contracts with the newly launched 6-year and 13-year government bonds maturing in 2020 and 2030 respectively.

Prior to that, the exchanges in May had introduced an IRF contract with the newly launched 10-year government bond maturing in 2025 as its underlying.

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