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Borrowing plans on expected lines, say traders

Traders say the government’s first-half borrowing from the bond market is on expected lines and yields are unlikely to see major movement…

Traders say the government’s first-half borrowing from the bond market is on expected lines and yields are unlikely to see major movement.

“The first-half borrowing is always front-loaded and we have seen so in previous financial years. This is as expected by the market,” said NS Venkatesh, head of treasury, IDBI Bank. The benchmark 10-year govenrment bond closed at 7.75% on Thursday, flat from the previous day. The bond yield is expected to move in a band of 7.70-7.80% for the rest of the month.

“The detailed calendar for the bond issuances is now awaited. Clearly, weekly auction amounts will be larger and some pressure would be seen on bond yields,” said a senior bond trader with a large public sector bank.

Adjusting for redemption of bonds, the net borrowing of the government would be 2.25 lakh crore, the government said. Further, the centre would borrow R45,000 crore through treasury bills. Treasury bill yields have hardened slightly in March so far in anticipation of tight liquidity.

Bond traders said yields could ease once liquidity deficit reduces. The 91-day T-bill yield was at 8.31%, up from 8.22% at the beginning of March.

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