New Delhi: Amid concerns of fresh bonds supplies this week in the market the bond yields closed at eight week high of 6.49%, as the government is likely to sell more debt to decrease a widening fiscal deficit (gap between expenditure and income).
The yield on the most traded 8.24% bond due in April 2018 ended at 6.49%, above its previous close at 6.37%.
During the day’s high, the yield rose 34 basis points (bps) this week after surging 92 bps in January.
Volumes were a heavy Rs91.55 billion on the Reserve Bank of India’s (RBI) trading platform, with the 2018 bond.
Direct tax collection for April 08 to January 09 rose, but slower-than-expected, to 12.5%, raised speculation that the government would squeeze in some extra bonds auctions in the final weeks this fiscal year to cover the gap caused by stimulus packages.
Last week, the government said its budget deficit in the first 9 months of the current fiscal year was already 164% of the annual target.
According to Suresh Tendulkar, economic adviser to the Prime Minister Manmohan Singh, the deficit may widen to as much as 8% of gross domestic product in the year ending March 31.
On Tuesday, a senior finance ministry official said the government might announce additional borrowing in its interim budget on 16 February.
The government has already sold Rs550 billion of bonds in excess of its budget estimate of Rs1.35 trillion for 2008-09, and has approval to sell another Rs150 billion before the end of February.
The Reserve Bank of India (RBI) will auction Rs47.49 billion of 10-year state loans on Thursday and the auction of Rs70 billion of papers is scheduled for Friday.