Life Insurance Corporation of India (LIC) wants the Reserve Bank of India (RBI) to issue souvenir bonds with a 100 year tenure.
The state run insurer chief Siddhartha Mohanty has said that LIC is in discussions with RBI on the idea. For an insurer, such long bonds can be assets that outlast the long term liability that arise from its life-span coverage of policy holders. But such bond must also be reasonably liquid or easy to sell in the wider bond market. To be sure RBI begin issuing 40 years government bonds in 2015 and also had a successful 50 year issue in 2023. Pension funds, insurers and other institutions with long liabilities find this useful as investments.
But 100 year bond may turn out to be a stretch too far.
Long term bonds are held on the assumption of sustained policy stability. The real value of money invested must hold largely steady . So inflation, interest rate and their drivers (like fiscal deficits) must stay within limits. Else, those bonds would lose market value.
Given how hard it is to ensure investor 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.