The Reserve Bank of India (RBI) is scheduled to sell Rs 2.87 lakh crore of bonds in the first half of the financial year 2010-11, which is 63% of the total gross borrowing programme. The notified amount for auction of treasury bills for the period April to June 2010 stands at Rs 1,09,000 crore.
On an average, bond issuances worth Rs 11,000-15,000 crore would hit the market every week. Dealers note that the borrowing programme is less than market expectations, as a result of which the bond yields have not been impacted.
?The borrowing calendar threw a small surprise to the market. The gross borrowing is less than what was widely expected. Borrowing at the longer end is smaller than one feared implies less strain on systemic liquidity. The market has rallied in relief and this rally might have some legs to it for a while. Some profit taking should come in below 7.75% in the benchmark 10 year bond,? said RK Gurumurthy, head of trading, financial markets at ING Vysya Bank.
The yield on the 10-year benchmark paper, 6.35% bond maturing 2020, fell by one basis point to 7.83% post the announcement of the borrowing programme.
It closed at 7.76%, down by nine basis points on Monday.
The government said that it plans to sell more of short-term and medium-term bonds. During the Union Budget 2010-11, the government said that it would borrow a gross of Rs 4.57 lakh crore during 2010-11 to fund a fiscal deficit of the projected 5.5% of the gross domestic product.
Dealers also noted that the monetary policy to be announced by the central bank in April will give out a clear signal to the market.
?While there is no surprise in the borrowing programme, the next thing to be watched out is the rate action during the monetary policies going forward. We expect the central bank to raise rates by 100-125 basis points in 2010-11 and the 10-year benchmark bond to trade at 8.5-8.75% levels,? said KP Suresh Prabhu, chief bond trader at HDFC Bank.