The central government will borrow Rs 8.45 trillion from the market through dated securities in the first half of FY23, or just about 59% of the revised full-year target, as it sought to front-load spending to spur growth. The finance ministry has now cut the full-year (FY23) gross market borrowing through dated securities from the budgetted level of Rs 14.95 trillion to Rs 14.31 trillion, citing a switch programme conducted on January 28.
Despite the expected lower borrowing, analysts expected bond yields to harden further. Icra chief economist Aditi Nayar said: “Once the borrowing calendar for FY23 kicks off, we expect the G-sec yields to start hardening in line with the global trends, even though the repo rate may not be hiked till August 2022.” She expected the 10-year G-sec yield to cross 7.0% over the next few weeks, and rise to as much as 7.4% over the course of H1FY23. The yield touched 6.81% on Wednesday.
The borrowing is scheduled to be completed in 26 weekly tranches of Rs 32,000-33,000 crore. It will be spread under 2, 5, 7, 10, 14, 30 and 40-year securities and floating rate bonds (FRBs) of various tenors.
The finance ministry said the share of borrowing under different maturities will be: 2 years (6.15%), 5 years (13.85%), 7 years (10.77%), 10 years (20%), 14 years (15.98%), 30 years (13.25%), 40 years (13.85%) and FRBs (6.15%). FRBs of various tenors will be issued on a fortnightly basis.
The government will continue to carry out switching of securities to smoothen the redemptions. Also, it may continue to exercise green-shoe option to retain an additional subscription of up to Rs 2,000 crore against each of the securities indicated in the auction notification, the ministry said.
To take care of temporary mismatches in the government account, the Reserve Bank of India has fixed the Ways and Mean Advances limit for H1 at Rs 1.5 trillion. The ministry said the government and the RBI are working jointly in bringing out a framework for issuance of sovereign green bonds, as announced in the Budget.
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