On Tuesday, as attitude shifted cautiously due to worries about another year of excessive borrowing, government bond rates closed modestly higher for the third session in a row.
After ending higher at 7.3283% on Monday, the benchmark 10-year yield ultimately came to 7.3335%.
According to Debendra Kumar Dash, senior vice-president of treasury at AU Small Finance Bank, “there are concerns about an elevated borrowing schedule, which has led to a spike in rates and made the market uneasy.” In the period leading up to the budget, there will be a great deal of uncertainty, with yields biased upward.
The government’s fiscal consolidation strategy and its borrowing schedule for the upcoming fiscal year will be heavily emphasized in the Union Budget 2023, which will be unveiled on February 1.
The vast majority of analysts and market players predict that the government would aim for a gross borrowing total of more than Rs 15.50 lakh crore ($189.56 billion).
The borrowing has been estimated at Rs 16.10 lakh crore by the State Bank of India’s economic research department. By making open market purchases, it was said that demand for the intermediate portion of the curve must be generated in order to relieve pressure on the 10-year sector.
It anticipates that states would grossly borrow 8 trillion rupees in the upcoming fiscal year, despite the fact that states are still falling short of their borrowing commitments for the current fiscal year.
According to the Reserve Bank of India (RBI), the consolidated gross fiscal deficit to gross domestic product ratio is predicted to decrease to 3.4% from 4.1% for the prior year, signaling an improvement in state finances in 2022–2023.
In the meantime, New Delhi hopes to generate Rs 28,000 crore on Friday through the issuance of bonds. A lower-than-expected Rs 6,700 crore was raised earlier in the day by four Indian states.