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India Eyes Bond Market Shift Amid Liquidity Surge
4 Sep
Summary
- Lenders seek investment avenues due to excess rupee liquidity.
- Government reviewing fiscal second-half borrowing schedule.
- Banking system liquidity surplus surpasses 10 trillion rupees.
Market analysis reveals a strong call for the Indian government to bolster the supply of short-duration bonds, as lenders actively seek investment options amidst significant rupee liquidity. The government is currently reassessing its fiscal second-half borrowing plan, scheduled for announcement later this month.
This reassessment follows a notable surge in the banking system's liquidity surplus, which has surpassed 10 trillion rupees for the first time, attributed to considerable dollar inflows. Participants suggest the government increase short-end bond supply to alleviate pressure on longer-dated securities.
For the current fiscal year, India's total borrowing target is 16.09 trillion rupees, with 7.89 trillion rupees planned for October to March. The supply of shorter maturities increased to 23.5% in April-September, up from 16.6% last year, while ultra-long bonds saw a decrease in their share.
