Quarterly Report on Debt Management for the Quarter January-March 2015 (Q4 FY 2014-15) Released
During Q4 of FY15, the Government issued dated securities worth Rs. 95,000 crore to complete the borrowings of Rs.5,92,000 crore projected in RE. For entire FY15, while gross market borrowings were higher than previous year's gross market borrowings (Rs.5,63,675 crore) by 5.0 per cent, net market borrowings were lower than previous year (Rs. 4,69,141 crore) by 4.7 per cent, reflecting higher repayments during the year 2014-15. During Q4, switch operations of Government of India securities were conducted with a scheduled commercial bank and RBI, wherein securities having face value of about Rs. 39,028 crore maturing in 2015-16 and 2016-17 were switched to a longer tenor securities maturing in 2026-27 and 2030-31. Auctions during Q4 of FY15 were held broadly in accordance with the pre-announced calendar. During the quarter, emphasis on re-issues was continued with a view to build up adequate volumes under existing securities imparting greater liquidity in the secondary market. The weighted average maturity (WAM) of dated securities issued during Q 4 of FY15 at 15.57 years was higher than 14.75 years for dated securities issued in Q 3 of FY15. The weighted average yield (cut-off) of issuance during Q4 of FY15 also declined to 7.79 per cent from 8.24 per cent in Q3 of FY15, reflecting a moderation in yields during the quarter. Liquidity conditions in the economy remained tight during the quarter, accentuating towards quarter end when liquidity in market tightened on account of financial year end demand. The cash position of the Government remained comfortable during the quarter. Consequently, the Government did not issue any CMB. The issuance amount under Treasury bills was also as per calendar.The public debt (excluding liabilities under the 'Public Account') of the Central Government provisionally increased by 0.9 per cent in Q4 of FY 15 on Q-o-Q basis as compared with an increase of 2.4 per cent in the previous quarter (Q3 of FY15). Internal debt constituted 92.1 per cent of public debt as at end-March 2015, while marketable securities accounted for 84.8 per cent of public debt. About 24.8 per cent of outstanding stock has a residual maturity of up to 5 years, which implies that over the next five years, on an average, around 5.0 per cent of outstanding stock needs to be rolled over every year. Thus, the rollover risk in the debt portfolio continues to be low. The implementation of budgeted buy back/ switches in coming years is expected to reduce roll over risk further.
G-sec (10 year BM) yield after opening at 7.91% softened in January 2015, amid declining crude prices, following the lower inflation numbers and in expectation of positive rate action from RBI (eventually repo rate under the LAF cut by 25 basis on Jan 15, 2015 by RBI), 10 year BM touched a 19 month low of 7.64% on Feb 1, 2015. The market traded in a range in February 2015 and RBI, reduced the SLR by 50 basis points to 21.5 per cent w.e.f. Feb 7, 2015 in its sixth bi-monthly monetary policy review on Feb 03, 2015. However, post-presentation of Union Budget 2015-16, despite pre-emptive policy action by RBI, yield hardened marginally in March 2015 owing to financial year end demands for the liquidity, higher than expected inflation number for Feb 2015 and low probability of rate cut after two surprise cuts by RBI. Compared to previous quarter, owing to policy rate cuts during the quarter, commencement of QE by ECB and expectations of lower inflation numbers owing to slump in global commodity prices, bonds yields moderated across the curve. In the final quarter, trading volumes, on an outright basis, were lower by 13.57 per cent over the previous quarter, due to lower trading on account of Central government dated securities (decrease of 15.07%). The annualised outright turnover ratio for Central government dated securities for Q 4 of FY15 decreased to 4.7 from 5.6 during the previous quarter.
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