NSE launches interest rate options on 10-year govt bonds; first day of launch witnesses turnover of 5,926 contracts

  • The move is aimed at providing an efficient tool for managing interest rate risk and exposure through hedging

  • Interest rate options are based on 10-year government bonds maturing in 2029 with coupon rate of 7.26% and 6.45%

  • An average daily turnover of around Rs 1,480 crore has been observed in the current financial year on NSE

New Delhi: Leading stock exchange NSE on Monday launched interest rate options on 10-year government bonds, with the first day of the launch witnessing turnover of 5,926 contracts.

Interest rate options are financial derivative contracts whose values are based on an underlying interest rate.

 NSE launches interest rate options on 10-year govt bonds; first day of launch witnesses turnover of 5,926 contracts

Representational image. News18

The move is aimed at providing an efficient tool for managing interest rate risk and exposure through hedging.

"Interest rate options will provide institutional investors the ability to manage risk through a non-linear product which is otherwise not available to them. Market participants can use options to trade and hedge interest rate risk on a transparent platform," Vikram Limaye, MD and CEO of NSE, said in a statement.

These interest rate options are based on 10-year government bonds maturing in 2029 with coupon rate of 7.26 percent and 6.45 percent, it added.

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

An average daily turnover of around Rs 1,480 crore has been observed in the current financial year on NSE, the exchange said.

Rival bourse BSE launched trading in interest rate options based on government securities in August this year.

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Updated Date: Dec 10, 2019 11:29:51 IST