Govt may announce lower borrowing needs next week
The government plans next week to announce lower than expected borrowing needs for the second half of the fiscal year ending in March, said four people briefed on the matter, in a move that could remove some nervousness in the bond market.
Senior government officials met with a select group of market participants earlier this week and assured them that the bond market borrowing programme for October to March would be lower than expected, said the people directly aware of the matter, who asked not to be named as the discussions were private.
The meeting, chaired by the finance ministry’s economic affairs secretary Subhash Chandra Garg, was called to get feedback on the current volatility in bond and currency markets, as well as assure the market players about the government’s intention to stick to its fiscal deficit and borrowing targets, the sources said.
“It was very clearly communicated that the government is senthe sitive to market apprehensions and will steer away from any negative or populist steps,” said one official. “There won’t be any rise in the borrowing programme, there can only be a reduction if any,” he said, adding that the government expected a pick up in revenues from the goods and services tax and small savings schemes.
The 10-year benchmark bond yield fell by four basis points to 8.05% following the initial report that the government planned to announce a reduction in its borrowing needs, but the yield inched up to 8.07 % later in the day. The people cited earlier said revised borrowing number will be announced on September 28. Bond traders said they had previously been expecting the government to aim to raise around ₹2.7 lakh crore during October-March, after raising ₹2.88 lakh crore during the AprilSeptember.
The remainder of the overall ₹6.06 lakh crore ($83.81 billion) gross borrowing programme for the fiscal year ending March 2019 is accounted for by plans for bond buy backs.
Indian bonds have fallen to their lowest in four years while the rupee has been the worst performer in Asia losing more than 13% since start of 2018 amid an emerging market rout on concerns over global trade wars, rising crude prices and potential rate hikes by the US Federal Reserve.
“The rising bond yield, currently at over 8% on 10 year bonds is a major concern,” a second official said.
The 10-year bond rose to 8.23% last week, its highest since November 14, 2014 while the rupee fell to a life time low of 72.99 to the dollar on September 18.
MUMBAI/NEW DELHI: