Indian government may borrow for canceled auction – sources

NEW DELHI/MUMBAI, Feb 22 (Reuters) – India’s government may hold more debt auctions on Friday after its final tender scheduled for the fiscal year, two people familiar with the matter said, to capitalize relatively low cost of borrowing.

The government had canceled its last two weekly debt sales worth 240 billion rupees ($3.21 billion) each as global yields rose and the state reached a comfortable cash balance for the fiscal year ending March 31.

But in a surprise move for the markets, the government announced on Monday that it would borrow 230 billion rupees in the final bond sale for the current financial year on February 25.

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Sources said while the government had a comfortable cash position even without further auctions, it would consider finalizing its planned borrowing if market conditions were appropriate.

“(We) will not commit if this is our last borrowing of the year. We are monitoring yields and will take a call accordingly,” a senior official directly involved in the matter told Reuters.

A second source said the government would be advised to borrow now to take advantage of the relatively lower yields.

The benchmark 10-year yield hit a two-and-a-half-year high of 6.95% after the government announced a record 14.95 trillion rupees to borrow for 2022/23 during the February 1 federal budget.

The yield, however, retraced almost all of its post-budget gains after auction cancellations and is currently at 6.73% as of 06:48 GMT.

India’s finance ministry did not immediately respond to the letter seeking comment.

Although the government cited the official reason for canceling the auction as a comfortable cash balance, sources told Reuters at the time that officials were concerned about the strong market reaction after the announced borrowing plan. .

However, traders warn that further auctions could push yields up again.

“The belief is that we are done with borrowing for this year. If the government decides to borrow for the canceled auctions later, it will cause a lot of pressure on bonds, especially in the current geopolitical environment,” he said. said a senior trader at said foreign bank.

“If we have more auctions this year, yields will likely go back up to 6.95%,” said a private bank trader.

($1 = 74.8325 Indian rupees)

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Reporting by Aftab Ahmed in Delhi and Swati Bhat in Mumbai. Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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