The government will borrow Rs 3.7 lakh crore from the market in the first half of 2012-13 through the sale of dated securities. This amounts to 65 per cent of the borrowing plan for the new financial year starting next month.
Keeping the overall higher borrowing target for 2012-13, the weekly auction amount has been increased to Rs 15,000-18,000 crore (Rs 150-180 billion) from Rs 10,000-15,000 crore (Rs 100-150 billion) in the current financial year. The majority of the issuances will be in the long-tenure bucket, according to the borrowing calendar released by RBI on Tuesday.
"Yields may trade at 8.70 per cent or higher in case there are no rate cuts by the RBI in the first six months of next financial year," according to T S Srinivasan, general manager (treasury), Indian Overseas Bank. "Post-rate-cut yields may soften to 8.25 per cent."
On Tuesday, yields on the 10-year benchmark bond closed at 8.5 per cent, three basis points higher than the previous close in anticipation that the government will front-load the borrowing programme, thereby drying up system liquidity. The yields have jumped 15 basis points since the close last week.
Auctions for four government securities will be conducted every week in April-September 2012,
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