Govt’s market borrowings down marginally in FY17

Government's market borrowings declined marginally in the 2016-17 financial year with an improvement in its cash position during the fourth quarter of FY17, which remained in surplus mode, according to government data.

Gross and net market borrowings of the central government for FY17 stood at Rs5,82,000 crore and Rs4,06,708 crore for fiscal 2016-17, which were lower by 0.52 per cent and 8.34, respectively, compared to Rs5,85,000 crore and Rs4,40,625 crore, respectively in the previous year, data released by the Department of Economics of the finance ministry showed.

The government also issued dated securities worth Rs80,000 crore in the January-March quarter of the 2016-17 financial year to complete its planned borrowings of Rs582,000 crore for FY 17.

In view of comfortable cash position of the government, Rs30,982.787 crore was utilised to buy-back securities from the market and borrowing from the market were also reduced by Rs18,000 crore during the quarter, says the release.

The weighted average maturity (WAM) and weighted average yield (WAY) of the issuance made during Q4 FY17 was 15.01 years and 6.75 per cent, respectively.

The liquidity in the economy was in surplus, post-demonetisation, during the quarter with the cash position of the government during Q4 of FY17 remaining comfortable and in surplus mode.

Public debt (excluding liabilities under the 'Public Account') of the central government provisionally declined by 1.9 per cent in Q4 of FY17 on a quarter-over-quarter basis.

Internal debt constituted 92.6 per cent of the public debt as at end-March 2017 while marketable securities accounted for 83.2 per cent of public debt. About 25 per cent of outstanding stock had a residual maturity of up to 5 years at end–March 2017, which implies that over the next five years, on an average, around 5.0 per cent of outstanding stock needs to be repaid every year. Thus, rollover risk in the debt portfolio continues to be low. The implementation of budgeted buy back/ switches during the quarter resulted in reduction of roll over risk.

G-sec yields were low across the curve at start of the quarter, post the government's decision on 8 November 2016 to demonetise high denomination value notes, which led to a surge in bank deposits and the bullish market sentiment, particularly for short end bonds. The bullish market sentiment and low yield was, however, restrained as RBI in its bi-monthly policy review during early February changed the monetary policy stance from accommodative to neutral leading to hardening of interest rates in the market.

Also on 15 February 2017, the US Fed indicated that it may hike the rates soon as the economy was growing at a healthy pace, which along with the presidential elections in USA also had a negative impact (due to protectionist view of the new government) leading to hardening of the yields. As such during the quarter, the yields were at elevated levels from mid-February onwards.

Trading volume of government securities on an outright basis during Q4 FY17 declined by 39.32 per cent over the previous quarter.