Since Apr-June (Q1) 2010-11, Public Debt Management Cell (PDMC) (earlier Middle Office), Budget Division, Department of Economic Affairs, Ministry of Finance has been bringing out a quarterly report on debt management on a regular basis. The current report pertains to the quarter July-September 2019 (Q2 FY20).

During Q2 of FY20, the Central Government issued dated securities worth ₹ 2,21,000 crore as against ₹1,44,000 crore in Q2 of FY19. The weighted average maturity (WAM) of new issuances stood at 15.89 years in Q2 of FY20 (15.86 years in Q1 of FY20). The weighted average yield (WAY) of primary issuances of dated securities for the same quarter was lower at 6.93 per cent compared to 7.21 per cent in Q1 of FY20. During July-September 2019, the Central Government raised ₹50,000 crore through the issuance of Cash Management Bills. The net average liquidity absorption by RBI under Liquidity Adjustment Facility (LAF) including MSF was ₹1,30,902 crore during the quarter. Report

The total liabilities (including liabilities under the ‘Public Account’) of the Government, increased to ₹91,01,484 crore at end-September 2019 from ₹88,18,392 crore at end-June 2019. Public debt accounted for 90.2 per cent of total outstanding liabilities at end-September 2019. Nearly 29.1 per cent of the outstanding dated securities had a residual maturity of less than 5 years. The holding pattern indicates a share of 39.7 per cent for commercial banks and 24.9 per cent for insurance companies at end-September 2019.

G-Sec yields softened in Q2 of FY20. The weighted average yield of primary issuances declined to 6.93 per cent from 7.21 per cent in Q1 of FY20. There was also a moderation in yields on G-Secs in the secondary market. The yield on the 10-year benchmark security (7.26% GS 2029) was also lower at 6.70 per cent on September 30, 2019 as against 6.88 per cent on July 1, 2019. The softening of yields reflected the impact of several developments namely a slight downward revision in the fiscal deficit target to 3.3% of GDP in the Regular Budget for FY20, reduction in the policy repo rate by 35 bps by the Reserve Bank in August, reduction in the target range for the Federal Funds Rate by 25 bps each in July and September 2019, benign CPI-based inflation rates, higher surplus transfer (than budgeted) by the Reserve Bank and surplus liquidity conditions in the market. Central Government dated securities continued to account for a major share of total trading volumes in the secondary market, with a share of 85.0 per cent in total outright trading volumes in value terms during Q2 of FY20.

Public debt issuance rose with longer maturities and softer government securities yields due to fiscal and liquidity developments. Central Government issuance increased with additional Cash Management Bills, maintained a weighted average maturity near sixteen years and a lower weighted average yield; total liabilities rose with public debt comprising the majority, notable residual short maturities under five years, and concentrated holdings in banks and insurers. Secondary market yields softened, including on the ten year benchmark, driven by fiscal target revision, domestic and international monetary easing, benign inflation, higher central bank surplus transfers, and surplus liquidity, while dated securities dominated outright trading volumes.