Mumbai: The Reserve Bank of India on Friday sold the last batch of government bonds worth Rs8,000 crore, completing the government’s borrowing programme of Rs4.51 trillion for the fiscal ending 31 March.
The bonds were fully subscribed, although the cut-off yields were higher than what markets had expected.
While the cut-off yield on a 10-year bond was at 7.6777%, compared with the market expectation of 7.65%, the yields on the 6-year and 17-year maturity bonds were at 7.5071% and 8.3228%, respectively. The markets had been expecting the cut-offs to be 7.46% and 8.31%, respectively.
Last lot: RBI headquarters in Mumbai. The quantum of government borrowing in the next fiscal will be disclosed in the Budget. Adeel Halim / Bloomberg
The yield on the 10-year bond on Friday was 7.68%, falling after the auction because of the higher cut-off yields.
“Immediate supply fears are quite low. But nervousness is still there on next year’s borrowing given global risk aversion and pressure on the fiscal side,” said Ananth Narayan G., head of rates and credit (South Asia) at Standard Chartered Bank.
The quantum of the next government borrowing, to bridge a fiscal deficit of an estimated 5.5% of the gross domestic product, will be disclosed in the Budget on 26 February. Although the fiscal deficit will be lower than the current fiscal’s 6.8%, the central bank, which is the government’s debt manager, expects the borrowing programme to remain at similar levels.
The government managed to keep its borrowing programme in check despite failing to raise about Rs35,000 crore through an auction of third-generation spectrum, and expenditure of Rs25,725 crore in the supplementary Budget on account of the bailout of Air India and Sixth Pay Commission recommendations.
(‘Reuters’ contributed to the story.)