Since April-June (Q1) 2010-11, Budget Division, Department of Economic Affairs, Ministry of Finance, is bringing-out a Quarterly Report on Debt Management on regular basis. The Current Report pertains to the Quarter July-September 2015 (Q2 FY 16).

During Q2 of FY16, the Government issued dated securities worth ₹ 1,71,000 crore taking the gross borrowings during H1 FY16 to ₹ 3,51,000 crore or 58.5 per cent of BE, vis-a-vis 58.7 per cent of BE in H1 FY 15. With repayment of ₹ 136,928 crore in H1 FY16, net market borrowings during H1 FY16 were at ₹ 214071 crore (46.9 per cent of BE), also lower than 56.0 per cent of BE in the previous year.

The market borrowings calendar for second half of FY16 have been adjusted down by ₹ 15,000 crore to take into account expected government borrowings through Sovereign Gold Bond and Gold Monetisation Scheme. Auctions during Q2 of FY16 were held in twelve tranches, broadly in accordance with the pre-announced calendar.

Efforts to elongate maturity were continued during the quarter. The weighted average maturity (WAM) of dated securities issued during Q2 of FY16 was at 16.46 years. The weighted average yield (cut-off) of issuances during Q2 of FY16, was at 7.96 per cent as against 7.92 per cent in Q1 of FY16. Liquidity conditions in the economy remained comfortable and mostly in surplus mode during the quarter. The cash position of the Government during Q2 of FY15 was comfortable and remained mostly in surplus mode barring a few occasions. The issuance amount under Treasury bills were also broadly as per calendar.

The public debt (excluding liabilities under the ‘Public Account’) of the Central Government provisionally increased by 2.1 per cent in Q2 of FY 16 on Q-o-Q basis. Internal debt constituted 92.1 per cent of public debt as at end-September 2015, while marketable securities accounted for 84.5 per cent of public debt.  About 27.2 per cent of outstanding stock has a residual maturity of up to 5 years, which implies that over the next five years, on an average, around 5.4 per cent of outstanding stock needs to be rolled over every year. Thus, the rollover risk in the debt portfolio continues to be low. The implementation of budgeted buy back/ switches in coming months is expected to reduce roll over risk further.

G-sec yields decreased across the curve during the quarter as compared to previous quarter. G-Sec market opened Q2 FY 16 on steady but cautious note and broadly showed positive sentiment in expectations of rate cut from RBI to support growth fundamentals as inflation numbers moderated. The market saw sharp correction in mid-Aug 2015 on account of devaluation of Chinese Yuan and concerns over slowdown in Chinese economy, which led to massive sell off across asset classes globally. The announcement of Medium Term Framework for staggered increase of FPI limits in debt securities along with announcement of setting FPI limit in rupee term and separate FPI limits for SDLs enthused the market towards end of quarter. The 10Yr benchmark paper touched two year low of 7.48% on this enthususm. The 10 year benchmark yield closed at 7.61% on September 30, 2015 as against 7.87% on June 30, 2015. In Q2 FY16, trading volumes, on an outright basis, decreased by 4.11 per cent over the previous quarter, with G-securities solely contributing to this decrease in trading activity.  The annualised outright turnover ratio for Central government dated securities during Q2 of FY16 also decreased at 4.2 as compared with 4.6 in previous quarter.

The Quarterly Report on Debt Management for the Quarter July-September 2015 (Q2 FY 16) is attached here with and is also available on the Finance Ministry’s website: finmin.nic.in

 

Government debt management: H1 borrowings of Rs. 3,51,000 crore; issuance focused on longer maturities and active cash management. Gross market borrowings in H1 FY16 were Rs. 3,51,000 crore with Q2 dated securities issuance of Rs. 1,71,000 crore and net market borrowings of Rs. 2,14,071 crore after repayments; primary issuance focused on elongating maturity (WAM 16.46 years, cut off yield 7.96%). Treasury bill operations produced gross issuance of Rs. 250,671 crore and a net T bill outflow of Rs. 10,930 crore for cash management. Outstanding public debt rose provisionally to Rs. 5,412,171 crore with internal debt 92.1% and rollover risk assessed as low given residual maturities and planned buybacks/switches.