India’s $64.5 Billion Borrowing Plan to Help Calm Bond Markets
India announced a fiscal first-half borrowing number that’s lower than what traders expected, as a check to rising yields.
(Bloomberg) -- India announced a fiscal first-half borrowing number that’s lower than what traders expected, as it seeks to check any rise in yields amid a global risk aversion that’s sparked outflows from emerging markets.
The government plans to sell 4.88 trillion rupees ($64.5 billion) of bonds in the six months to September, or 62.5% of the budgeted 7.8 trillion rupees, Economic Affairs Secretary Atanu Chakraborty told reporters in New Delhi. That in line with the usual 60%-62% that authorities usually typically raise in the first half of each year.
The announcement should help calm investor anxiety over excess supply to fund massive stimulus measures announced last week to cushion the impact the three-week lockdown ordered by Prime Minister Narendra Modi to check the spread of coronavirus cases. The administration will instead meet its short-term needs by borrowing from the central bank.
“The government deciding to not raise borrowings will come as a relief to the market,” said Harish Agarwal, a trader with FirstRand Bank Ltd. in Mumbai.
The first-half debt sales work out to 190-210 billion rupees a week, and the administration won’t privately place debt with the Reserve Bank of India or Life Insurance Corp. of India, Chakraborty said. Bond buybacks and debt switches have been penciled in at 2.7 trillion rupees for the full year, while the so-called Ways and Means Advances have been set at 1.2 trillion rupees versus 750 billion rupees in the April-September period of the previous fiscal, he said.
Emergency Measures
Finance Minister Nirmala Sitharaman has unveiled a 1.7-trillion rupee package for the weaker sections and hinted at more steps. Economists expect a bigger stimulus package for sectors like aviation, travel, and tourism -- sectors that have been the worst-hit by the emergency restrictions. The RBI followed on March 27 with measures, including a 75-basis point cut in benchmark borrowing costs. The central bank has already injected 400 billion rupees of cash via open market operations in March.
On Monday, the authorities said they will open up some bonds, including the benchmark 10-year paper, completely to foreign investment. The move is aimed at getting included in key global bond indexes, which typically tend to draw a lot of passive investment.
The moves have helped ease bond yields. While shorter-tenor notes have rallied more due to massive liquidity injection, gains in longer bonds have been limited by concerns about the government’s fiscal situation.
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