Government bond yields likely to soften further by end of the fiscal
Government bond yields are likely to soften further by the end of the fiscal, leading to an annualised savings of Rs 1,000-2,000 crore for the exchequer. Higher demand, especially from foreign portfolio investors, would help yields remain tamed, economists said, pointing to North Block’s second-half borrowing calendar published last week.
The Centre’s gross borrowings for the second half of the fiscal have been fixed at Rs 6.61 lakh crore with the borrowing target for the entire fiscal being maintained at Rs 14.01 lakh crore, the central bank said last week. About 77% of the bond issuances will be for 10 years or higher tenure.
«Given the favourable global and domestic backdrop, we expect a further downward bias in domestic yields, leading to a steepening bias in the yield curve,» Bank of Baroda economist Aditi Gupta said.
Bond yields have eased gradually in the first half of the fiscal, with the 10-year benchmark yield at more than a two-and-a-half year low last week, tracking lower US treasury and soft oil prices.
«The 10-year government-security yield is expected to reduce towards 6.5% by March 2025, supported by favourable demand-supply dynamics and expected RBI rate cut,» an IDFC First Bank report said. Demand for g-secs is bolstered by India's inclusion in the JP Morgan Emerging Market bond index, besides the usual demand from insurance, provident- and pension funds.
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