Bond Forward in G-Secs

The RBI’s Bond Forward Directions came into effect from 2 May 2025.

  • On 21 February 2025, the Reserve Bank of India (“RBI”) issued directions to permit bond forwards in government securities by way of the Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025 (“Bond Forward Directions”).

Bond Forwards

Definition

  • Bond forwards are financial contracts between two parties to buy or sell government bonds (central or state) at a pre-determined price on a future date.

Purpose

  • Help long-term investors (e.g., insurance companies) hedge interest rate risk.
  • Improve cash flow planning.
  • Contribute to the development of the bond derivatives ....
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