Govt plans to borrow Rs 2.49 lakh crore in second half of the year
Keeping its gross market borrowing unchanged at Rs 6 lakh crore for FY16, the government on Monday said it would borrow Rs 2.49 lakh crore in the second half of the year: Rs 2.34 lakh crore through bonds and another Rs 15,000 crore via gold bonds.
In the first half, the government had borrowed Rs 3.51 lakh crore against the target of Rs 3.6 lakh crore as it had cancelled Rs 9,000 crore from the originally planned Rs 15,000 crore in one of the auctions.
As part of the measures to boost domestic savings, the government has recently approved a gold bond scheme to encourage a shift from savings in physical gold into financial products. The gold bond will be issued on payment of money and would be linked to the price of gold.
Market borrowing of Rs 2.34 lakh crore in October-March period would result in a weekly borrowing of Rs 14,000-15,000 crore from the bond market via auctions. The first auction will be on October 1, where the RBI would offer to sell three bonds of different maturities.
Market borrowing in the second-half of the year includes Rs 9,000 crore from the first half that the government had postponed.
In October-December, the government will also borrow Rs 1.32 lakh crore through short-term Treasury bills, the ministry said.
Dealers said that given the market borrowing is along expected lines, there is unlikely to be a sharp movement in bond yields. Further, most market participants have priced in a 25 basis points cut in policy rates by the RBI at its bi-monthly policy on Tuesday.
“It is more or less on line with market expectations and yields are unlikely to get impacted. The key driver for bond market is now the monetary policy,” said Ashish Vaidya, executive director and head fixed income trading at DBS Bank.
The benchmark 10-year government bond yield ended at 7.73% on Monday. Bond yields have been moving in a tight range of 5-7 basis points over the last month.