Centre may keep borrowing schedule

It is to announce issuance calendar of govt securities later this month for second half of the fiscal

The government is expected to stick to its market borrowing programme worth Rs 5.79 lakh crore when it announces the issuance calendar for government securities later this month, for the second half of the financial year.

In the first half, it had planned to borrow Rs 3.49 lakh crore, about 60 per cent of the year’s budgeted total. The government has said on several occasions that the fiscal deficit for the current year will be maintained at 4.8 per cent of gross domestic product.

“The government will stick to its borrowing programme and the issuance calendar for the second half might not have an impact on government bond yields because we would see more open market operations. In case there are any surprises in the borrowing programme, we can expect that only in the fourth quarter,” said Dhawal Dalal, head of fixed income, DSP BlackRock Mutual Fund (MF).

The second half calendar is expected to include the Rs 5,000 crore worth of government bonds not auctioned last Friday. “I do not think the intent was ever to cut the market borrowing programme by cancelling this amount,” said Suyash Choudhary, head of fixed income, IDFC MF.

The yield on the 10-year benchmark government bond ended at 8.50 per cent on Thursday, compared with the previous close of 8.46 per cent. Since the government will stick to the borrowing programme, yields might soften. “The yield on the 10-year benchmark bond might average at 8.50 per cent for the rest of the fiscal and sometime during the year, it might also touch eight per cent,” said Dwijendra Srivastava, head of fixed income, Sundaram MF.

While announcing the programme, the government had also said an additional Rs 50,000 crore of borrowing might be there for a bond buyback/switch programme. According to Choudhary, considering the present market scenario, this amount might be put on hold.

The yield on the 10-year benchmark government bond was quoting at 7.99 per cent at the start of this financial year. It had hardened in recent times and even touched 9.23 per cent on August 19 due to the weakening rupee.

Yields began hardening after the Reserve Bank of India started tightening liquidity to arrest the rupee’s fall.