The Budget Division, Department of Economic Affairs, Ministry of Finance, brings out the Quarterly Report on Public Debt Management for July-September 2022. Since April-June (Q1) 2010-11, Public Debt Management Cell (PDMC) of the Budget Division has been bringing out a quarterly report on debt management on a regular basis. The current report pertains to the quarter July-September (Q2 FY23).

During Q2 of FY23, the Central Government raised an amount worth ₹4,06,000 crore through dated securities, as against notified amount of ₹4,22,000 crore in the borrowing calendar, while repayments were at ₹92,371.15 crore. The weighted average yield of primary issuances hardened to 7.33 per cent in Q2 FY23 from 7.23 per cent in Q1 of FY23. The weighted average maturity of new issuances of dated securities was lower at 15.62 years in Q2 of FY23 as compared to 15.69 years in Q1 of FY23. During July-September 2022, the Central Government did not raise any amount through the Cash Management Bills. The Reserve Bank did not conduct Open Market operations for government securities during the quarter. The net daily average liquidity absorption by RBI under Liquidity Adjustment Facility (LAF) including Marginal Standing Facility and Special Liquidity Facility was at ₹1,28,323.37 crore during the quarter.

Total gross liabilities (including liabilities under the ‘Public Account’) of the Government, as per provisional data, increased to ₹1,47,19,572.2 crore at end-September 2022 from ₹1,45,72,956 crore at end-June 2022. This represented a quarter-on-quarter increase of 1.0 per cent in Q2 FY23. Public debt accounted for 89.1 per cent of total gross liabilities at end-September 2022 up from 88.3 per cent at end- June 2022. Nearly 29.6 per cent of the outstanding dated securities had a residual maturity of less than 5 years.

The yields on Government securities in secondary market hardened in short- end curve due to near-term inflation and liquidity concern though softening of yield was observed for the longer tenure securities during the second quarter of FY23. MPC decided to hike the policy repo rate by 100 bps, i.e., from 4.90% to 5.90% during Q2 FY 2023 largely with an intention to contain inflation.

In secondary market, trading activities were concentrated in 7-10 year maturity bucket during the quarter mainly because of more trading observed in 10 year benchmark security.  Private Sector Banks emerged as dominant trading segment in secondary market during the quarter. On a net basis, foreign banks and primary dealers were net sellers while public sector banks, co-operative banks, FIs, insurance companies, mutual funds, private sector banks and ‘Others’ were net buyers in the secondary market. The ownership pattern of Central Government securities indicates that share of commercial banks stood at 38.3 per cent at end-September 2022 as against 38.04 per cent at end-June 2022.

Access the full report: Quarterly Report on Public Debt Management for July-September 2022

Public debt management: issuance below calendar, yields hardened and maturities shortened amid liquidity pressures. Central Government borrowing in July-September 2022 involved issuance of dated securities below the notified calendar amount, with primary yields hardening and weighted average maturity of new issuances shortening. No cash management bills were issued and RBI did not conduct open market operations; liquidity absorption under LAF was substantial. Total gross liabilities rose quarter on quarter, public debt increased its share of liabilities, and a significant share of outstanding dated securities had residual maturities under five years.