Indian bond traders are bracing for a sell-off if the government sticks to its planned 1.7-trillion-rupee ($37.2 billion) borrowing plan for the second half despite a sharp rise in federal revenues. Six out of 10 market participants in a Reuters survey expected no change in the borrowing when the October-March schedule is announced on Thursday, traders said.
Four participants saw a possibility of 100 billion to 150 billion rupees reduction in the borrowing. "The market will react negatively if there is no cut in borrowing and the 10-year yield could rise by about 5 basis points and the 5-year OIS rate could rise by 2-3 basis points," said Anindya Das Gupta, head of treasury at Barclays Capital.
The government had planned to borrow a gross 4.57 trillion rupees in 2010/11. Of the budgeted 2.87 trillion rupees to be raised in April-September, it has borrowed 2.73 trillion so far. Government revenues have been boosted by an auction of 3G and wireless broadband spectrum that raised 1.06 trillion rupees, about three times more than expected, thanks to aggressive bidding by firms in the world's fastest growing mobile market.
Tax receipts have also been buoyant on the back of a rebounding economy. April-August net direct tax receipts rose 13.9 percent to 1 trillion rupees from a year ago. The benchmark 10-year bond yield could rise to 7.98 percent if the government does not reduce the borrowing, traders said.
The bond was trading at 7.94 percent by 0626 GMT, steady from its previous close. Traders said a token reduction in borrowing was unlikely to spur a rally in bonds, with some hoping the government may await divestment proceeds from state companies in the coming quarter before deciding on a cut. State-owned Coal India Ltd, the world's largest coal miner, is set to launch an initial public offer in October to raise up to $3 billion, with the government selling a 10 percent holding.
"Divestment proceeds remain a surprise factor and they (the government) could look to mop up more than budgeted," said Dwijendra Srivastava, head of fixed income at Sundaram BNP Paribas Mutual Fund. "They may not look to borrow much in the months of Feb-March." In early August, the government had approved an additional expenditure worth about 550 billion rupees, which could absorb revenues.
Source: http://economictimes.indiatimes.com/Bonds/articleshow/6612101.cms
Four participants saw a possibility of 100 billion to 150 billion rupees reduction in the borrowing. "The market will react negatively if there is no cut in borrowing and the 10-year yield could rise by about 5 basis points and the 5-year OIS rate could rise by 2-3 basis points," said Anindya Das Gupta, head of treasury at Barclays Capital.
The government had planned to borrow a gross 4.57 trillion rupees in 2010/11. Of the budgeted 2.87 trillion rupees to be raised in April-September, it has borrowed 2.73 trillion so far. Government revenues have been boosted by an auction of 3G and wireless broadband spectrum that raised 1.06 trillion rupees, about three times more than expected, thanks to aggressive bidding by firms in the world's fastest growing mobile market.
Tax receipts have also been buoyant on the back of a rebounding economy. April-August net direct tax receipts rose 13.9 percent to 1 trillion rupees from a year ago. The benchmark 10-year bond yield could rise to 7.98 percent if the government does not reduce the borrowing, traders said.
The bond was trading at 7.94 percent by 0626 GMT, steady from its previous close. Traders said a token reduction in borrowing was unlikely to spur a rally in bonds, with some hoping the government may await divestment proceeds from state companies in the coming quarter before deciding on a cut. State-owned Coal India Ltd, the world's largest coal miner, is set to launch an initial public offer in October to raise up to $3 billion, with the government selling a 10 percent holding.
"Divestment proceeds remain a surprise factor and they (the government) could look to mop up more than budgeted," said Dwijendra Srivastava, head of fixed income at Sundaram BNP Paribas Mutual Fund. "They may not look to borrow much in the months of Feb-March." In early August, the government had approved an additional expenditure worth about 550 billion rupees, which could absorb revenues.
Source: http://economictimes.indiatimes.com/Bonds/articleshow/6612101.cms
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