India has revealed a borrowing strategy for the first six months of the financial year that is lower than what the market had anticipated. The government plans to raise eight trillion rupees through bond sales in the period ending in September. This figure is below the 8.4 trillion rupees expected by analysts surveyed by Bloomberg News.
The reduced borrowing announcement is likely to have a positive effect on Indian bonds, potentially expanding on the gains seen this year. This optimism is fueled by increasing speculations of an interest rate cut by the Reserve Bank of India during its policy review scheduled for April 9.
An expert from Kotak Mahindra Bank Ltd. forecasts that bond yields will trend downward due to anticipated policy rate adjustments, liquidity easing efforts, and foreign investments throughout the year. It is estimated that the yield on the 10-year benchmark bond will fluctuate between 6.35% and 6.65% in the first half of the fiscal year.
The borrowing target for the first half represents 54% of the total annual borrowing goal of 14.8 trillion rupees. Compared to previous practices, the percentage of total debt issued by the government in this period is slightly lower.
The government plans to allocate 25% of the bonds to the less-than-10-year category, with 35% earmarked for 30-50 year bonds. The benchmark 10-year bond sale will constitute 26.2% of the total, while also introducing 100 billion rupees' worth of green bonds.
Indian bond yields hit a three-year low of 6.58% due to recent steps taken by the central bank to improve liquidity and market expectations for further easing measures.
The Reserve Bank of India has infused more than $60 billion in liquidity over the last two months to address the liquidity shortage, which had soared to a multi-year peak in January. Foreign investments in Indian bonds have increased, aided by rising interest from insurance and pension funds, as well as the inclusion of India in JPMorgan Chase & Co.'s emerging market debt indices in June last year.
Foreign investors have poured $3 billion into rupee bonds so far this month, marking the highest figure since 2017. Additionally, the government plans to sell 190 billion rupees' worth of treasury bills over a thirteen-week period from April to June.