(Bloomberg) — India announced a borrowing plan for the first half of the fiscal year that’s lower than market expectations.
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The government plans to sell eight trillion rupees ($93.2 billion) of bonds in the six months to September, the Ministry of Finance said in a statement after trading ended on Thursday. That’s lower than the 8.4 trillion rupees estimated in a Bloomberg News survey.
Indian bonds may react positively to lower borrowings and help extend this year’s gains, driven by growing bets of a cut in interest rates at the Reserve Bank of India’s policy review on April 9.
“We expect bond yields to drift lower, supported by policy rate and stance easing, liquidity easing measures and foreign inflows through the course of the year,” Upasna Bhardwaj, chief economist at Kotak Mahindra Bank Ltd., wrote in a note.
The yield on benchmark 10-year bond is likely to trade in the 6.35%-6.65% range in the fiscal first half, she wrote.
The first-half borrowing will account for 54% of the full-year target of 14.8 trillion rupees, according to the statement. That compares with about 60% of total debt the government usually issues for the period.
New Delhi will sell around 25% of the bonds in the less-than-10-year bucket, while 35% of the sales will comprise the 30-50 year bonds. The benchmark 10-year bond will account for 26.2%, the government said. It will also sell 100 billion rupees of green bonds.
The yield on benchmark 10-year bond hit a new three-year low of 6.58% on Thursday, helped by the recent central bank’s liquidity easing measures and further easing bets.
The RBI has injected over $60 billion worth of liquidity over the last two months to curb the liquidity deficit that widened to a more-than-decade high of 3.3 trillion rupees in January. It was at 200 billion rupees as of March 26, as per a Bloomberg Economics index.
Indian bonds have also benefited in recent years from a surge in purchases from insurance and pension funds. Foreigners have also raised holdings of sovereign bonds with JPMorgan Chase & Co. adding India to its emerging market debt indices in June last year.
Foreigners have poured in $3 billion in rupee bonds so far this month, the most since 2017.
The government will sell 190 billion rupees of treasury bills for thirteen weeks through April-June, according to the statement.
