India to announce October-March borrowing plan on September 26

Mumbai: The Indian government is likely to announce the country's market borrowing plan for October through March on Thursday, two sources told Reuters on Wednesday, with the market hoping for a higher supply of longer-dated bonds.

. Of its planned Rs 14.01 lakh crore in gross borrowing for the April-March financial year, the government has about Rs 6.61 lakh crore left for the remaining six months.

. While some market participants expect a cut to the leftover amount, the majority expect the government will stick to its budgeted borrowing.

.ADB retains India's growth forecast at 7%; government spending, agriculture to boost economy. The "market has not given up hope of a cut in the borrowing program, (but it) may be in December or January. A cut in borrowing is much more positive for the longer-end (bonds)," said A Prasanna, head of research at ICICI Securities Primary Dealership.

. Market participants are keen to see the government's appetite for shorter-tenor treasury bills, especially after it, in an unprecedented move, canceled two such auctions earlier this month.

. But, the overwhelming demand is for more longer-dated paper, especially as yields have dropped drastically, pulling the government's borrowing costs for such paper to a near three-year low.

. Nearly 40 per cent of the government's borrowing from April to September was via longer-end papers.

. Demand from Indian insurance companies and pensions funds pulled the yield on 50-year bonds under 7 per cent for the first time ever earlier this month, while the 30-year bond yield has declined 50 basis points so far this year.

. Insurers and pension funds invest a majority of their corpus into long-term government bonds to ensure adequate cash flow down the line as payouts come due, leading to unrelenting demand for such papers.

. "We are present at every auction with demand of 10-15 billion rupees and, irrespective of the yields, we have to buy long papers for our product mix," a trader with a large pension fund said.

. The trader and the two sources mentioned above declined to be named as they are not authorised to speak to the media.

India to announce October-March borrowing plan on September 26

Follow us on :

Follow Us