India plans 8.45 trillion rupees of bond sales in fiscal first half

[MUMBAI] India announced the fiscal first-half borrowing plan largely in line with previous years amid a global bond rout and lingering geopolitical uncertainties.

The government will auction 8.45 trillion rupees (S$151 billion) of bonds in the 6 months to September, or about 59 per cent of the full-year target, the ministry of finance said in a statement after close of markets on Thursday (Mar 31).

The borrowing plan may push up yields in the market facing global headwinds from higher crude oil prices and US Treasury yields. Even while the Reserve Bank of India (RBI) has continued to signal an accommodative stance to support growth, traders still have to contend with a record supply of 14.31 trillion rupees in the fiscal year starting Apr 1.

"Once the borrowing calendar kicks off, we expect the yields to start hardening in line with the global trends," even though the interest rates may not be hiked till August, said Aditi Nayar, an economist with Icra. "10-year yields may cross 7 per cent over the next few week and rise to 7.4 per cent over the course of first half."

Bonds sold off earlier in the day, with the yield on the 10-year government bond rising by 6 basis points to 6.84 per cent.

The borrowing will be spread over 26 weekly tranches of 320 billion rupees-330 billion rupees, the government said. The framework for borrowing via green bonds is being worked out jointly by the government and the RBI and will be announced separately, it said.

The government will also borrow a net 2.4 trillion rupees via Treasury bills in April-June, it said. Traders are also waiting on the central bank's rate decision on Apr 8 to gauge how long the RBI can continue its accommodative stance amid price pressures.

They would also want to hear how the RBI can support the bond market with the monetary authority having limited scope for bond purchases as it soaks up excess liquidity.

Yields will have a marginal upside bias but will get direction after RBI policy, said Shailendra Jhingan, chief executive at ICICI Securities Primary Dealership. BLOOMBERG