Bond market dealers have welcomed the union government’s debt borrowing targets for FY11, saying the lower numbers could lead to a short term rally in dated securities. Though bond yields fell immediately after the finance minis-ter’s speech, they were trading higher than the previous close at 14.45 hrs.
The yield on India's 10-year benchmark bond yield traded at 7.89% at 14.45 hrs. It had ended at 7.83% on Thursday. Dealers said this was due to uncertainity about Market Stabilisation Scheme (MSS) bonds that would be un-wound in the coming fiscal.
“There is no bad news, which is a positive in the short-term. But a government borrowing programme of Rs 4.57 lakh crore is sizeable and would drain out a lot of liquidity” said Ashish Vaidya head of fixed income currencies and commodities trading at UBS. “I will not be surprised if the 10-year bond ends the year at 8%”
Finance minister Pranab Mukherjee said on a gross basis, the government would raise Rs 4.57 lakh for FY11, compared with Rs 4.51 lakh cr in the current year ending March. Dealers had predicted this figure would be in the range of 4.6 lakh cr to Rs 4.9 lakh cr.
Net borrowing target (the amount after accounting for the scheduled bond redemptions that pump liquidity) stands at 3.45 lakh cr, compared with about RS 3.97 lakh cr this year.
“The target announced is largely in line with what market expectations,” said Prasanna Patankar, senior vice president at STCI, a bond house. “However the market is not clear about the MSS securitities desequestration required for the next year, hence there is a sell off” he added.
Market watchers say the budget has addressed the key issues of containing fiscal slippage and outlined a clear roadmap for the next three years. The finance minister projected the fiscal deficit for the next fiscal year at 5.5%, which was lower than market expectations.
SS Raghavan, head of treasury at IDBI Gilts, another bond house said he expects the ten-year yield to fall to 7.75% in the short term.
Source: http://economictimes.indiatimes.com/markets/bonds/Union-Budget-2010-Market-borrowing-lower-than-estimates/articleshow/5620037.cms
The yield on India's 10-year benchmark bond yield traded at 7.89% at 14.45 hrs. It had ended at 7.83% on Thursday. Dealers said this was due to uncertainity about Market Stabilisation Scheme (MSS) bonds that would be un-wound in the coming fiscal.
“There is no bad news, which is a positive in the short-term. But a government borrowing programme of Rs 4.57 lakh crore is sizeable and would drain out a lot of liquidity” said Ashish Vaidya head of fixed income currencies and commodities trading at UBS. “I will not be surprised if the 10-year bond ends the year at 8%”
Finance minister Pranab Mukherjee said on a gross basis, the government would raise Rs 4.57 lakh for FY11, compared with Rs 4.51 lakh cr in the current year ending March. Dealers had predicted this figure would be in the range of 4.6 lakh cr to Rs 4.9 lakh cr.
Net borrowing target (the amount after accounting for the scheduled bond redemptions that pump liquidity) stands at 3.45 lakh cr, compared with about RS 3.97 lakh cr this year.
“The target announced is largely in line with what market expectations,” said Prasanna Patankar, senior vice president at STCI, a bond house. “However the market is not clear about the MSS securitities desequestration required for the next year, hence there is a sell off” he added.
Market watchers say the budget has addressed the key issues of containing fiscal slippage and outlined a clear roadmap for the next three years. The finance minister projected the fiscal deficit for the next fiscal year at 5.5%, which was lower than market expectations.
SS Raghavan, head of treasury at IDBI Gilts, another bond house said he expects the ten-year yield to fall to 7.75% in the short term.
Source: http://economictimes.indiatimes.com/markets/bonds/Union-Budget-2010-Market-borrowing-lower-than-estimates/articleshow/5620037.cms
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