Yield falls on govt word it will stick to borrowing plan

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SummaryBond yields edged lower on Monday after the finance minister assured the government will stick to its borrowing plan as it attempts to close a budget shortfall amid some revenue raising setbacks.

Bond yields edged lower on Monday after the finance minister assured the government will stick to its borrowing plan as it attempts to close a budget shortfall amid some revenue raising setbacks.

Chidambaram confidently predicted on Saturday that he would be able to contain the deficit to 5.3% of GDP. Traders, who had positioned for the government to borrow up to 400 billion rupees extra from the market, unwound some of their bets post the statement.

However, market participants await a solid action from the government to patch up the fiscal deficit given its plans, which relies mainly on the airwaves auction and share sale in state-run companies, seem to falter.

The benchmark 10-year bond yield ended 3 basis points lower at 8.2%. Bonds are also supported as higher drawdown from repo borrowing is keeping open market expectations valid, traders said.

Repo borrowings from the central bank have remained above the R1 lakh crore for the ninth sessions as of Monday. India will also detail its July-September GDP on Nov. 30, which will be closely watched by investors to see whether the economy slows further.

The benchmark 5-year OIS rate fell 1 basis point to 7.17%, while the 1-year OIS rate was steady at 7.76%.

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