NSE: Interest rate options on GoI bonds

India’s biggest and the world’s third largest stock exchange in terms of the amount of transactions, the National Stock Exchange (NSE) recently introduced interest rate options on 10-year Government of India bonds, witnessing turnover of 5,926 contracts soon after the launch.

As per the press release, the MD & CEO of NSE, Vikram Limaye said, ‘By launching Interest Rate Options, we have added one more instrument to the fixed income derivatives asset class. 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’.

Interest rate options are based on the underlying GoI 10-year bonds-the 7.26 per cent 2029 bond and the 6.45 per cent 2029 bond.

At present, interest rate futures are only available on 7 Government of India bonds for residual maturity ranging from 4 to 15 years.

The contracts will be available for three serial monthly contracts followed by three quarterly contracts of the cycle March/June/September/December. The contract would end on the last Thursday of the expiry month and will be cash settled.

On Tuesday, the Nifty 50 index opened at 11,950.50 against a previous close at 11,937.50.