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Informist, Tuesday, Mar. 25, 2025

 

By Aaryan Khanna

 

NEW DELHI – The Indian government, while open to feedback from market participants, sees little need to make major tweaks to the borrowing calendar for 2024-25 (Apr-Mar) while preparing the same for FY26, a finance ministry official said.

 

"Being consistent should pay dividends in G-sec issuance," the official told Informist on the condition of anonymity. "We are happy with how the market has reacted to new bonds in FY25 and so I don't think there is much to do in terms of the calendar."

 

The government has received the market's feedback ahead of the announcement of the borrowing calendar for Apr-Sept, and is conducting an internal assessment of its borrowing needs, the official added. While nothing has been finalised so far on how the Centre will split its FY26 gross borrowing programme of INR 14.82 trillion over the two halves of the year, bond traders expect the calendar for Apr-Sept to be announced this week. Market participants want the Centre to increase its issuances in the first half of FY26 to 55-60% of its gross borrowing from 53.1% this year to leave more room for states to borrow in Oct-Mar.

 

"Some of the things the market pitched to us last year did not really pan out the way they thought," the official said, referring to demand from life insurers and foreign portfolio investors in FY25 being lower than anticipated. "In terms of auctions, the only pain point was green bonds, which we will have to plan for."

 

The last year or so have seen some subtle changes to the borrowing calendar, with the Centre introducing a 50-year bond in the second half of FY24 and shifting its 14-year issuances to a 15-year bond starting in the first half of FY25. Further, prior to FY25, certain tenures saw issuances every other week. But this pattern was changed for the 10-year and other heavily-issued bonds to once in three weeks, with each of these auctions being for a higher quantum.

 

Six bond market participants across segments who attended meetings with the Reserve Bank of India on the borrowing calendar for Apr-Sept said they have asked for long-term bonds to constitute a lower share of the borrowing calendar in the first half. Instead, they want the Centre to increase the share of bonds that mature in seven or fewer years. These tenures would see robust demand on account of expectations that the RBI's Monetary Policy Committee will cut the policy repo rate at least once in the first half of next year, they said. However, the finance ministry will have one eye on its redemptions, which are set to rise sharply in FY27 and peak at a massive INR 7.89 trillion in FY31, as per data reviewed on Monday.

 

"Insurers have themselves asked for long-term supply to be moderated," a market participant said. "The pickup in traditional insurance products is slowing, while premiums are already tied up in bond forward-rate agreements."

 

In the first half of FY25, 37.9% of the Centre's issuances were through bonds maturing in 30-50 years, after excluding green bonds. The market wants that proportion to be reduced to 35% or lower this time around.  End

 

US$1 = INR 85.63

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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