India keeps H2 FY2020 borrowing calendar unchanged

The Government in yesterday announcement has kept gross borrowings for H2 FY2020 unchanged at INR 2.68 tn. This will be done through 17 weekly auctions with 15 auctions to the tune of INR 160 bn and 2 auctions of 140 bn each. With INR 4.42 tn gross borrowing in H1 the overall FY2020 borrowing remains unchanged at INR 7.1 tn. The Government also mentioned its intention to stick to its fiscal glide path and target of 3.3% of GDP in FY2020 so far and in a seperate announcement provided the divestment framework by privatizing BPCL, SCI, NTPC, NHPC and (partially) CONCOR.

A few of the other important developments are as follows:

  1. There will be a cap to FRB issuance at 10% of borrowing
  2. The government is still working on overseas sovereign borrowing which requires careful calibration. Till then only rupee borrowing will be done.
  3. Switching of gilts and buybacks to continue in H2, however, the exact amount would be determined as per market conditions
  4. Government to complete H2 borrowing in week ending January 31

Impact on bond markets and way forward:

1. This could provide some relief to the fiscal concerns which have surfaced post the corporate tax cuts and due to not putting much options on table for the improvement of liquidity management (latter being mainly due to reduced expectations of further bond purchases)

2. We expect RBI to continue with rate cuts In Friday meeting of MPC and easing monetary policy to continue till FY20-end. This should continue to provide relief to the bond markets as fiscal and monetary policy start acting in a complementary manner.

3. The global bond environment would also assist the domestic bond markets; as most global central banks continue on their path of accommodation. Moreover, global growth slowdown amidst unpredictable US-China trade wars have had a weakening bias on oil prices and would aid domestic bond yields.  

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