27 Mar 2022

Government borrowing analysis

Market awaits Government borrowing calendar for H1FY23 to be notified by RBI, which will guide direction of g-sec yield movements in coming days. While record amount of Rs 14950 billion as gross borrowing has been budgeted for FY23, around 60% is expected to be borrowed during H1FY23.

author dp
Team INRBonds
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Market Borrowing during FY23-

During FY22, Government of India’s gross market borrowing stood at Rs 11043.82 billion while net borrowing stood at Rs 8401.03 billion.

 

 

Gross Borrowing

Net Borrowing

H1FY22

6713.57

5321

H2FY22

4330.25

3080.03

Total

11043.82

8401.03

 

Auction cut-off-

 

10-year

15-year

30-year*

40-year

FY21

6.21%

6.89%

6.85%

6.82%

FY22

6.77%

7.08%

7.44%

7.09%

*6.67% 2050 for FY21 while 6.99% 2051 for FY22

 

From the above table, auction cut-off yield has increased at the end of FY22 as compared to that of FY21. During H1FY22, to keep bond yield at a lower level, RBI has used tools such as G-SAP and Operation Twist. However, during H2FY22, gilt yields rose in absence of any such tools.

 

10-year benchmark auction cut-off rose by 66 bps while 15-year paper auction cut-off rose by 19 bps. At the end of FY21, 6.67% 2050 yield cut-off stood at 6.85% while at the end of FY22, 6.99% 2051 auction yield came in at 7.44%. 40-year paper auction yield moved up by 21 bps at the end of FY22 from that of FY21.

 

Budgeted Market Borrowing for FY23-

For FY23, gross market borrowing has been set at Rs 14950 billion while net market borrowing pegged at Rs 11186 billon. Fiscal deficit has been pegged at 6.4% of GDP for FY23.

 

Government bonds, SDL and OIS yield movements

 

Last week, 6.54% 2032 paper yield rose by 3 bps to 6.81% while 6.10% 2031 yield increased by 2 bps to 6.83%. The 5-year benchmark bond, 6.79% 2027 yield rose by 2 bps to 6.34%. 6.64% 2035 yield lost 2 bps to 7.12%. Long-term paper, 7.16% 2050 yield increased by 1 bp to 7.27%.

 

The spread of 10-year bond over 5-year bond declined to 79 bps from 84 bps in previous week. The 15-year benchmark over 10-year benchmark spread decreased to 31 bps from 33 bps while 30-year benchmark over 10-year benchmark spread decreased to 46 bps from 48 bps on weekly basis.

 

Average 10-year SDL auction cut-off rose to 7.24% from 7.22% in previous week while spread rose to 41 bps from 40 bps.

 

On weekly basis, 1-year OIS yield rose by 10 bps 4.52% while 5-year OIS yield increased by 14 bps to 6.03%.

 

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