Govt cancels Rs 15K cr bond auction, switches Rs 27K cr debt

In view of government's comfortable liquidity position, RBI has cancelled Rs 15,000 crore bond auction and switched Rs 27,000 crore worth of papers into longer tenor gilts.
"It has been decided to cancel the deferred auction scheduled on January 17, 2014 amounting Rs 15,000 crore. This would result in decrease in Government market borrowing programme for 2013-14 to that extent," the Reserve Bank said in a statement.
Last month, the government had deferred the bond auction citing comfortable cash position.
RBI further said that it has switched Rs 27,000 crore worth bonds scheduled to mature on 2014-15 and 2015-16 fiscal into longer term papers.

Under the debt switch plan of Rs 50,000 crore stated in the Budget 2013-14, the government plans to buy short-dated debt, and in turn sell longer-dated bonds. This is aimed at spreading out redemptions of debt to later years.
"Securities from 2014-15 and 2015-16 maturity buckets for face value of about Rs 27,000 crore have been successfully switched to longer tenor security with an institutional investor last week," it said.

The government issues dated securities to meet its borrowing requirements.
The total market borrowing by the government would now come down to Rs 5.64 lakh crore, from Rs 5.79 lakh crore as envisaged in the 2013-14 Budget. The net borrowing, which is a reflection of fiscal deficit, as per the budget was Rs 4.84 lakh crore.

Finance Minister P Chidambaram had earlier said that the 4.8 per cent fiscal deficit is a red-line and it would not be breached under any circumstance in current financial year. The deficit was 4.9 per cent in 2012-13.
Besides, the government has already asked the ministries to curtail their non-plan expenditure and avoid spending rush in the January-March quarter with a view to keeping fiscal deficit under check.