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Informist, Monday, Sept. 1, 2025

 

--Mkt sources: RBI to discuss H2 borrowing calendar with select bks this wk

--Mkt sources: PDs, MFs, insurers likely to meet RBI on H2 borrow next week

 

NEW DELHI – The Reserve Bank of India will meet select banks this week to discuss the government's borrowing calendar for Oct-Mar, according to four treasury officials aware of the matter. Standalone primary dealerships, mutual funds, and insurance companies are expected to meet the central bank on the subject next week, they said. Money markets and the RBI are shut Friday.

 

The central bank and market participants regularly meet ahead of the release of the borrowing calendar every half-year. September's meeting is part of the same dialogue and the RBI will then likely pass on the market's feedback to the government, the officials said. Market participants are likely to ask for a lower share of borrowing through gilts maturing in 30-50 years, which totalled 35% in the first half borrowing pattern.

 

The ask comes amid a spike in government bond yields in August as investors' appetite for gilts has dried up amid hefty supply from both the Centre and states. The yield on the 10-year benchmark 6.33%, 2035 gilt rose around 20 basis points in August while the 40-year benchmark yield rose over 30 bps. Multiple officials indicated they are likely to recommend the government borrow more in ultra-short durations, including Treasury bills and the three-year bond, the shortest dated security in the government's current borrowing plan.

 

"There is no demand anywhere on the curve, either in the short-end or long-end," one of the treasury officials said. "It is a mix of a cash problem with investors and a confidence problem with traders."

 

The government is on track to raise INR 7.95 trillion of its aim of INR 8.00 trillion in Apr-Sept. The only blemish so far in the fiscal year that began Apr. 1 was the RBI rejecting all bids for INR 50-billion of the 6.98%, 2054 green bond at an auction in June, with no devolvements on underwriters. Regardless, treasury officials said they expect the government to continue issuing sovereign green bonds in the second half of the fiscal year.

 

The government is also expected to continue with its revamped issuance pattern that was introduced in Apr-Sept, of one bond being featured only once every four weeks and only two bonds being issued per auction, the treasury officials said. The government has raised 45.48% of its full-year gross borrowing aim of INR 14.82 trillion. With per-auction sizes likely to fall slightly in the second half of the fiscal, the issuance pattern itself is no threat to bond yields. However, the bunched-up supply is likely leading to higher cut-off yields and, therefore, borrowing costs for the government amid the lack of demand, the officials said.  End

 

Reported by Aaryan Khanna

Edited by Rajeev Pai

 

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