Jaswant Singh launches interest rate derivatives trading on NSE

New Delhi: Indian Finance Minister Jaswant Singh has formally launched trading in interest rate derivatives on the National Stock Exchange (NSE), starting with futures on 91-day treasury bills and a 10-year notional bond.

Describing the move as a "major milestone," Singh says the futures products now on offer will be available for a maximum maturity of one year. Trading in the Mumbai Inter-Bank Offered Rate (MIBOR) and other instruments, including options, will be introduced in due course.

The launch began with four trades of Rs 25 crore each, involving two deals on the 10-year zero coupon bond (involving Punjab National Bank and IDBI Capital, and Bank of Baroda and IDBI Capital) and two others on a 91-day bill (between State Bank of India and PNB Gilts, and between HDFC Bank and IDBI Capital).

Singh says that in the present scenario, where interest rates on most debt instruments are deregulated, market players are continuously exposed to risks arising from unanticipated movements in interest rates. "Introduction of interest rate derivatives will help institutions like provident funds, insurance companies, banks and corporates, which have long-term liabilities, to hedge themselves against volatility in interest rates."