Borrowing Through Benchmark 10-Year Bond Crosses Rs 2 Lakh Crore

Government borrowing through the benchmark 10-year bond topped Rs 2 lakh crore, becoming the second such bond series.

The current outstanding amount for the 10-year bond stands at Rs 2.01 lakh crore, according to data from the Reserve Bank of India. Last month, the outstanding amount for the bond maturing in 2063 crossed Rs 2 lakh crore and is currently at Rs 2.16 lakh crore.

This shows the government's tolerance for borrowing through a particular bond series. The quantum of borrowing set for the current benchmark bond was Rs 1.54 lakh crore, which was breached early last month.

The current 10-year bond was launched in August 2023, with a coupon rate of 7.18% and is set to mature in 2033.

As the gross borrowings have increased massively since the pandemic, it is natural to see increased borrowing per security, said Mataprasad Pandey, vice president, Arete Capital Service Pvt.

According to Pandey, a new benchmark bond should be announced in the next financial year. "As we are done with this year's borrowing already, hence, the RBI would have preferred to issue new 10-year benchmark next year."

Experts also forecast the lower-than-expected government borrowing to be a positive for the debt market. In the 2024 interim budget, the gross market borrowing was pegged at Rs 14.13 lakh crore. This was lower than the figure of Rs 15 lakh crore that economists had expected.

The 10-year bond yield fell sharply after the announcement of the market opening and on Monday, it closed at 7.09%.

As inflation continues to moderate, bond yields will also soften and borrowing costs will come down, Reserve Bank of India Governor Shaktikanta Das said on Monday. Interest payments as a quantum were linked to bond yields, Das explained at a post-budget press conference in New Delhi.