MUMBAI: The finance ministry is meeting primary bond dealers Wednesday as the government tries to assess the debt market appetite before it kicks start the borrowing plan in the new financial year, said two people familiar with the matter.
Officials from the RBI and the Public Debt Management Agency are also expected to attend the meeting, which is happening in New Delhi instead of Mumbai,” said one of the persons cited above. A joint secretary may preside the meeting.
The ministry normally meets bond houses at the end of every financial year but in Mumbai. This time, it is happing at the national capital with the government keeping a close watch on rising yields. Increased bond yields will only add to the government’s borrowing cost.
The government will sell Rs 6.06 lakh crore worth of sovereign securities compared with Rs 5.8 lakh crore in the current year. The RBI, the government’s market borrowing agent, may publish the borrowing calendar this Friday.
The benchmark bond yield surged as much as 7.77% in February pulling prices down amid fear of fiscal slippages and muted demand. In a span of six months ending February, the government bond yields surged about 100 basis points triggering jitters among debt market participants.
“They may ask market views on what should be bond maturities and yield expectation as the objective is to check higher borrowing cost in a crucial pre-election year,” said another person aware of the matter. India will go for general election early 2019.
Yields recovered from its earlier high after the Reserve Bank injected Rs 1 lakh crore short term liquidity in March, end of the financial year that sees fund crunch in the system.
The yield on the benchmark government bond was little changed at 7.62% Tuesday.
The government also wants to assess liquidity in the system and how it may impact rates, market sources said.
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