Key Takeaways
- Indian bond market participants suggest higher short-term borrowing.
- Government aims to borrow a record 16.09 trillion rupees for the current fiscal.
- Liquidity surplus in the banking system has prompted the suggestion.
Indian bond market participants have called for increased short-term borrowing to address surplus rupee liquidity, according to sources familiar with the matter.
The government aims to borrow a record 16.09 trillion rupees for the current fiscal, including 7.89 trillion rupees from October to March, which is about 49% of the annual target.
With the banking system's liquidity surplus jumping above 10 trillion rupees for the first time, market participants are seeking more investment avenues.
One treasury source stated, '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.'
The supply of shorter duration maturities was at 23.5% of the total borrowing for April-September, up from 16.6% a year earlier.
At the same time, ultra-long bonds with maturities of 30 to 50 years accounted for 24.9% of April-September borrowing, down from 35% a year earlier.
New Delhi has started consultations with market participants for the fiscal second-half borrowing calendar, which will continue through next week.
The borrowing calendar will be announced towards the end of the month, before the central bank’s monetary policy decision on October 7.
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.
Treasury source, Treasury source
