[Investors Please Listen] Bond Supplies - Government doles out 2/3rds of budgeted FY10 borrowing in H1FY10

Government doles out 2/3rds of budgeted FY10 borrowing in H1FY10

As we enter into FY10 when the government and RBI are expected to steer the economy from the ongoing slump through various monetary and fiscal tools and the tax kitty is likely to shrink due to the rates reduction and the overall economic contraction, capital receipts will play a significant role in financing the INR 9.5 tn expenditure bill.

 

The RBI, on March 26, announced the H1FY10 borrowing program at INR 2.41 tn, with an estimated weekly borrowing (bonds, bills and state development loan, SDL) of INR 230 bn (table 1). Given below are some details of the borrowing program:

n         Compared with INR 960 bn in H1FY09, INR 2410 bn will be auctioned in H1FY10.

n         With debt servicing of INR 1.01 tn in H1FY10, net borrowing is INR 1.41 tn.

n         Of INR 1.01 tn, INR 330 bn is in bond redemptions and remaining in interest payments.

n         OMO buyback would continue over the next 6-months; INR 800 bn worth bonds are expected to be bought back, equally distributed over the two quarters.

n         MSS bonds and bills worth INR 420 bn would be unwound over H1 FY10, INR 375 bn in Q1 and rest over next quarter.

n         In Q1FY10, the monthly issuance will be INR 480 bn against INR 320 bn in Q2.

 

The benchmark yield shot 20bps to 7.18% as a knee jerk to borrowing programme release; however, it recovered and closed at 7%. As the details of the financing the auction through OMO and MSS unwinding was released after market hours we can anticipate positive opening on March 30.

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