Budget 2024: Bond market focus fixated on government’s fiscal discipline commitment, borrowing plan

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Also Read: Budget 2024: FY25 fiscal deficit likely to be estimated at 5.5% of GDP, say economists “Government’s commitment to fiscal consolidation will be in focus for fixed income investors. Since the government has committed to target a 4.5% fiscal deficit by FY26, the bond market will be keenly looking at consolidation from 5.9% in FY24. The continuation of capex expenditure will be keenly observed.

The government has focused on raising capex spending and market participants will look at the government to continue the same," said Anurag Mittal, Head of Fixed Income, UTI AMC. Besides, credible revenue, expenditure assumptions and market borrowing will also be in focus. On Monday, Indian government bond yields were flat, with the benchmark 10-year yield trading around 7.1757%, following its previous close at 7.1760%.

Indian bond yields eased marginally after benchmark bonds saw strong demand at the last auction ahead of the union budget on February 1. Mittal believes a fiscal deficit between 5.3-5.5% with a net market borrowing of ₹11.5-11.8 lakh crore could be taken positively by the bond market. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Economists expect the government to meet its gross borrowing target of ₹15.4 lakh crore and net borrowing target of ₹11.8 lakh crore in FY24.

They expect the government’s borrowings from the bond market in FY25 to be marginally higher. “Despite better than expected revenue collections, the government will maintain the target, on account of higher than anticipated spending and due to a shortfall on the part of disinvestment receipts. In FY25, even as revenue collections are