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Friday, March 27, 2009

Government borrowing for 1st Half of Fiscal 2009-10

The RBI has released the government borrowing calendar for the first half of fiscal 2009-10. The government is scheduled to borrow Rs 241,000 crores of dated government securities in the April- September 2009 period. The government will auction Rs 48,000 crores of bonds in each of the months of April, May and June 2009. July, August and September 2009 will see issuances of Rs 34,000 crores, Rs 31,000 crores and Rs 32,000 crores respectively.


The inflows into the system in the April-September 2009 period through redemption of government bonds and coupon payments is Rs 100,000 crores of which redemption of government bonds is Rs 33,000 crores. The MSS (Market Stabilization Scheme) bonds unwinding for the same period is Rs 42,000 crores.


The RBI has announced that they will purchase Rs 80,000 crores of bonds from the open market in the first half of fiscal 2009.


To summarise


Government bond auctions (a) Rs 241,000 crores

Government Bond Redemption (b) Rs 33,000 crores

MSS unwinding (c) Rs 33,000 crores

RBI purchase (d) Rs 80,000 crores


The market will have to absorb Rs 95,000 crores ((a-(b+c+d)) of additional government bonds in the period April-September 2009.


The number of Rs 95,000 crores of government bond supply for the market to absorb is not daunting given that RBI will keep policy rates at all time lows, liquidity will be high in the system and inflation will be at all time lows.


We reiterate our positive interest rate outlook and as the market gets adjusted to the supply, bond yields will start trending down.



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