Intraday yield up 27 bps in sharpest surge since Feb. 2017
The yield on the most-traded 10-year government bond spiked 20 bps (basis points) on Monday after the government announced it would increase its market borrowings by more than ₹4 lakh crore for FY21, post market hours on Friday.
The yield stood at 6.17% at the close of trading hours on Monday, up 20 bps from the previous close. Intraday, yield rose 27 bps, the sharpest intraday surge since February 2017.
“The estimated gross market borrowing in the financial year 2020-21 will be ₹12 lakh crore in the place of ₹7.80 lakh crore as per BE (budgeted estimates) for 2020-21. The above revision in borrowings has been necessitated on account of the COVID-19 pandemic,” the Finance Ministry said in a statement on Friday.
As per the new revised FY21 borrowing calendar, the central government will now borrow ₹6 lakh crore in the first half of the current financial year against the ₹4.88 lakh crore budgeted initially.
The nationwide economic lockdown imposed by the government to curb the spread of the pandemic had resulted in a lower tax revenue for the government.
Dealers said till such time the Reserve Bank of India announces open market operations (OMO) to purchase government securities to address the supply glut, there would be pressure on yields.
“Markets would closely watch the RBI’s stance on fiscal funding, possibly in the form of OMO purchase calendar,” said Madhavi Arora, lead economist, Edelweiss Securities.
“We note that in April, the Reserve Bank has estimated to have done secondary OMOs to the tune of ₹750 billion [₹75,000 crore] already. Nonetheless, unless there are more assertive actions by the RBI on funding of the government’s market loans, there will remain an overhang on the G-sec market, with more pressure on the longer end of the curve,” she added.
Source: The Hindu