 "Yields ease with RBI decision on transfer to govt")
Government bond yields eased on Monday, following the RBI decision to transfer a surplus amounting to Rs 52,679 crore for the year ending June 30 to the government.
“Due to the surplus dividend payout by RBI, the bond auction amount for this week is down to Rs 8,000 crore, compared with Rs 14,000 crore as per the issuance calendar of dated securities. This is positive for the market, due to which the yield on the new 10-year bond dropped as against Friday's close,” said a senior treasury official of a private sector bank.
ALSO READ: RBI to transfer Rs 52,679 cr surplus profit to govt
The amount transferred by RBI to the government was Rs 33,010 crore for the year ending June 30, 2013.
The yield on the 10-year bond closed at 8.59 per cent on Monday, compared with Friday's of 8.64 per cent. The yield had even risen to 8.68 per cent on Friday during intra-day trade. For the bond market, last week was the worst weekly performance in a month, due to increasing global risk aversion and concerns that RBI might delay rate cuts.
Sentiment was also dampened because RBI had, at its monetary policy review on Tuesday, reduced the Statutory Liquidity Ratio by 50 basis points (bps) to 22 per cent of banks net demand and time liabilities (NDTL). The cut resulted in concern that banks might start selling their illiquid securities in the market. Beside cutting the SLR, the central bank had reduced the total holdings of SLR securities in the held-to-maturity category by 50 bps to 24 per cent of NDTL. Due to these measures, the yield on the 10-year bond rose sharply by 11 bps on Tuesday, to close at 8.61 per cent.
The total borrowing requirement in 2014-15 has been budgeted at Rs 6 lakh crore or 4.7 per cent of GDP. A net market borrowing of Rs 4.61 lakh crore has been budgeted to finance 86.8 per cent of the fiscal deficit. In the 2014-15 issuance calendar, issued in March, RBI had said in the first half of this financial year, government bonds worth Rs 3.68 lakh crore would be auctioned.
“Due to the surplus dividend payout by RBI, the bond auction amount for this week is down to Rs 8,000 crore, compared with Rs 14,000 crore as per the issuance calendar of dated securities. This is positive for the market, due to which the yield on the new 10-year bond dropped as against Friday's close,” said a senior treasury official of a private sector bank.
ALSO READ: RBI to transfer Rs 52,679 cr surplus profit to govt
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Analysts said the amount transferred would help improve the government's fiscal profile. The latter aims to cut the fiscal deficit to 4.1 per cent of gross domestic product (GDP) for the year ending March 2015.
The amount transferred by RBI to the government was Rs 33,010 crore for the year ending June 30, 2013.
The yield on the 10-year bond closed at 8.59 per cent on Monday, compared with Friday's of 8.64 per cent. The yield had even risen to 8.68 per cent on Friday during intra-day trade. For the bond market, last week was the worst weekly performance in a month, due to increasing global risk aversion and concerns that RBI might delay rate cuts.
Sentiment was also dampened because RBI had, at its monetary policy review on Tuesday, reduced the Statutory Liquidity Ratio by 50 basis points (bps) to 22 per cent of banks net demand and time liabilities (NDTL). The cut resulted in concern that banks might start selling their illiquid securities in the market. Beside cutting the SLR, the central bank had reduced the total holdings of SLR securities in the held-to-maturity category by 50 bps to 24 per cent of NDTL. Due to these measures, the yield on the 10-year bond rose sharply by 11 bps on Tuesday, to close at 8.61 per cent.
The total borrowing requirement in 2014-15 has been budgeted at Rs 6 lakh crore or 4.7 per cent of GDP. A net market borrowing of Rs 4.61 lakh crore has been budgeted to finance 86.8 per cent of the fiscal deficit. In the 2014-15 issuance calendar, issued in March, RBI had said in the first half of this financial year, government bonds worth Rs 3.68 lakh crore would be auctioned.