Bond dealers not very
alarmed as this brings to an end the uncertainty on state and government GST
compensation drama for now.
The yields on the five-year
bonds jumped in their opening trades, but the benchmark 10-year remained
relatively calmer after the government announced extra borrowing of Rs 1.1
trillion, to be equally raised in five- and three-year tenures, to compensate
states on good
and services tax (GST) shortfall.
Bond dealers didn’t seem
very perturbed with the extra borrowing, but said the initial reaction on the five-
and three-year bonds would be adverse because they also declined by about 25-30
basis points after the policy on October 9.
The yields on the 10-year
bond opened at 5.922 per cent from its previous close of 5.898 per cent, the 5-year
bond rose to 5.2550 from its previous close of 5.161 per cent. At 10.05 am,
there was no trade in the three-year bonds, after its close of 4.718 per cent
on Thursday.
“The incremental borrowing,
while it will put pressure on the market, is in a way a positive. It will put
an end to the Centre-State GST shortfall controversy, at least for the time
being. It does away with the incremental state borrowing on this count,” said
Joydeep Sen, fixed income consultant at Philip Capital.
Besides, the government is
raising money for the shortfall in GST cess and not for its other expenditure,
and hence the deficit is being maintained for now, bond dealers say.
Following the government’s
announcement, the Reserve
Bank of India (RBI) came up with a revised issuance calendar where it said
that the amount will be raised at Rs 55,000 each in three years and five years’
securities
No comments:
Post a Comment