Ahead of Budget 2020, FPIs reduce bond exposure on unfavourable cues

There is fear that the RBI has no wiggle room for further rate cuts. Without rate support, yields will rise. This translates into a fall in prices for bonds

Ahead of the Union Budget on February 1, foreign investors are busy liquidating their debt holdings, particularly in government securities.

There is fear of massive borrowing in the Budget, which the bond market expects to be at least Rs 7.5 trillion, from the Rs 7 trillion planned for 2019-20.

There is also the fear that the Reserve Bank of India (RBI) has no wiggle room for further rate cuts. Without rate support, yields will rise. This translates into a fall in prices for bonds. The investors, therefore, are cashing in before yields jump on unfavourable Budget numbers, say bond dealers.

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