Indian bond market
participants have suggested that the government increase supply
in the shorter duration, as most lenders are holding surplus
rupee liquidity and looking for investment avenues, three
treasury sources aware of the matter said on Friday.
All the officials requested anonymity as they are not
authorised to speak to the media.
Here are a few details:
New Delhi has started consultations with market
participants for the fiscal second-half borrowing calendar,
which will continue through next week.
The government aims to borrow a record ₹16.09 lakh crore
($170.33 billion) for the current fiscal, including ₹7.89 lakh crore
from October to March, about 49 per cent of the annual
target.
The suggestion comes after India’s banking system
liquidity surplus jumped above ₹10 lakh crore for the first
time ever, helped by bigger-than-expected dollar inflows.
“With such high rupee liquidity from nearly all the major
banks and few lending avenues, it makes sense for the government
to increase short-end supply and ease pressure on the 10-year,”
one of the officials said.
Supply of shorter duration maturities was at 23.5 per cent of the
total borrowing for April-September, up from 16.6 per cent a year
earlier.
At the same time, ultra-long bonds with maturities of 30
to 50 years accounted for 24.9 per cent of April-September borrowing,
down from 35 per cent a year earlier.
The borrowing calendar will be announced towards the end
of the month, before the central bank’s monetary policy decision
on October 7.
($1 = 94.4650 Indian rupees)