FRAs back in vogue, help insurers in fixed rate of interest for payouts

Forward Rate Agreements enables insurers lock in a fixed rate of interest rate for a future pay out

With the Reserve Bank of India (RBI) announcing two rate hikes since May, the June quarter was challenging for banks when it came to managing their bond investments.

While government bond yields hardened across maturities, securities maturing in 30 years and above witnessed a much smaller yield increase. Bond prices fall when yields rise and vice versa.

In 2022, so far, the yields on five-year and 10-year government bonds have surged 131 basis points and 93 basis points, respectively. The yields on 30-year and 40-year bonds, on the other hand, have climbed 62 and 58 basis points, respectively, during