Government bonds gained on Friday, the last trading day of the fiscal year, as the borrowing plan for April-September came largely in line with market expectations.
The government will borrow a gross R3.68 lakh crore in the first half of the fiscal year, which is 61.6% of the full-year target, economic affairs secretary Arvind Mayaram said on Friday. The government will borrow an average R17,000 crore per week in April and May, slightly lower than market expectations of around R18,000 crore.
“The borrowing is more in line with market expectations. I don’t see substantial movement either way,” said Kush Sonigara, analyst with My Capital Solutions.
Cash rates spiked to their one-year high as demand was greater than supply at year-end. The overnight call rate rose as much as 13.75%, a typical phenomenon during year-end, when banks shy away from lending as they prefer to hold cash for balance-sheet purposes.
It was a tumultuous year for bond markets in which yields rose 85 bps as the central bank had to resort to extra-ordinary monetary steps to ratchet up short-term interest rates to support a sliding rupee.
The rupee plunged to a series of life lows during last summer after the US Fed indicated for the first time in May that it would roll back on the flood of easy money that had fed emerging market assets.
Yields surged to 9.48% in August, their highest in five years. Yields stabilised after the rupee recovered on the RBI’s move to bring in inflows from NRIs and the government's move to cut down CAD. Bonds continued to find support as the rupee surged to an eight-month high, breaching 60 to the dollar. The 10-year bond yield closed 2 basis points lower at 8.80%.