Opinion
Mint Quick Edit | Anybody for 100-year government bonds?
Summary
- State-run insurer LIC wants RBI to issue sovereign bonds of 100-year tenure. Will these be sufficiently liquid in the wider market? And can India assure investors of the sustained economic stability needed to generate demand?
Life Insurance Corporation of India (LIC) wants the Reserve Bank of India (RBI) to issue sovereign bonds with a 100-year tenure. The state-run insurer’s chief Siddhartha Mohanty has said that LIC is in discussions with RBI on the idea.
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For an insurer, such long bonds can be assets that outlast the long-term liabilities that arise from its life-span coverage of policyholders. But such bonds must also be reasonably liquid, or easy to sell in the wider bond market.
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To be sure, RBI began issuing 40-year government bonds in 2015 and also had a successful 50-year issue in 2023. Pension funds, insurers and other institutions with long liabilities find these useful as investments. But a 100-year bond may turn out to be a stretch too far.
Long bonds are held on the assumption of sustained policy stability. The real value of the money invested must hold largely steady. So inflation, interest rates and their drivers (like fiscal deficits) must stay within limits. Else, those bonds would lose market value.
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Given how hard it is to assure investors of that, a market for 100-year bonds won’t be easy to create. And issuance for a single subscriber is unwise. First, India should test the depth of demand for shorter-tenure long bonds.
