Despite rising bond yields, the government will stick to its borrowing plan

The centre will continue to build on its FY23 borrowing plan, approved in March, despite the recent drop in bond yields, as it expects the market to calm down soon. Some expected the centre to hold onto some offers after bond yields soared.

“We think yields will decline… The strong growth lately is mainly due to geopolitical factors,” the government official said, adding that the borrowing plan had already ended and would continue as announced.

     

Benchmark 10-year government bond yields rose to 7.25% earlier in the month from an average of 6.83% in March, reacting to a 17-month high of 6.95% in inflation of Indian retail prices in March. Russo-Ukrainian conflict, fears of spikes in oil prices and rising interest rates in the US The yield has since dropped to around 7.1%.

States are likely to borrow less this year, after centralized cash transfers in March and a Rs 1 trillion investment support announced in the budget, the official said.

This will leave the Centre free to borrow via dated pegged securities at a gross amount of 14.95 lac crore in FY23. Gross market lending is now expected to be 14.31 lac crore lower after swaps. completed on January 28, 2022.

The Centre and the Reserve Bank of India (RBI) are closely monitoring the bond market in relation to geopolitical events.

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