LIC Signs $1 Billion in Bond Derivatives Amid Rising Hedging Activity

Life Insurance Corporation of India (LIC) has entered into forward rate agreements (FRAs) worth $1 billion with Wall Street banks, including JPMorgan Chase & Co. and Bank of America Corp, according to a Bloomberg report. As per the report, the deals were executed over the past 2 months.

Large Share of FRA Market

The contracts account for 38% of total FRA volumes since May, out of a total of $2.6 billion, according to data from the Clearing Corporation of India. LIC began exploring this market in November last year with smaller transactions.

FRAs are being used by LIC to lock in future bond yields. These tools help safeguard returns on fixed-income investments in case interest rates fall in the future.

Structure of the FRA

In a typical FRA, LIC agrees to buy bonds at a set price on a future date. The bank that signs the contract takes on the price risk and receives a premium in exchange. To balance the exposure, banks often purchase long-term bonds.

Impact on Bond Market

As per the report, LIC’s increased participation has contributed to rising demand for long-term bonds. The last 2 auctions for such securities recorded the highest bid-to-cover ratios so far in the financial year that began April 1, 2025.

Portfolio Movement

LIC, which manages $630 billion in assets, saw a decline of ₹46,000 crore in its equity portfolio between June 30 and July 25, 2025. The value slipped from ₹16.10 trillion to ₹15.64 trillion, though it has risen from the April low of ₹1.94 trillion.

Read more: LIC’s Stake in NSE Rises Amid IPO Buzz and Legal Resolution Hopes!

LIC Share Price Performance 

As of 10:33 AM on July 29, 2025, Life Insurance Corporation of India (LIC) share price was trading at ₹894.20, a 0.38% increase..

Conclusion

LIC’s recent FRA deals mark a notable increase in the use of bond derivatives by Indian financial institutions. The transactions have added to demand in the long-term bond market.

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