Category: Bonds

Question : Who lends money to Indian government ?

Indian government’s total expenditure normally remains much higher than the total revenue receipts. The difference, known as fiscal deficit, is the amount of capital government needs to borrow to bridge this gap. After eight years of moderation, the fiscal deficit saw a significant bump in FY20 and is expected to increase significantly in the current year due to Covid. The deficit projections for the current fiscal have ranged between 6.75% to 7.25% of GDP – levels last observed three decades […]

Spread between one year and ten years bond remains at decade high : Operation Twist ?

Past three months have seen the yields on short tenor papers (~ one year) crash by almost 125 bps while the yields for long tenor bonds haven’t seen a commensurate decrease. Yields on these longer tenor 10 year bonds have reduced by ~40 bps only. This has resulted in spreads between one year and ten years paper reaching levels last observed in 2010( as depicted in below chart). The tenor spread has remained over 200 bps consistently for the past […]

A brief history of India’s Foreign Reserves

India’s foreign exchange reserves crossed half a trillion dollars during the first week of June. In an otherwise negative economic environment, country’s healthy forex reserves act as strong mitigants for potential macro-economic risks. India now ranks fifth in the list of countries with highest foreign exchange reserves behind China, Japan, Switzerland and Russia. CountryForeign Exchange Reserves in India (million USD)China3,101,692Japan1,378,239Switzerland848,398Russia565,200India501,703 Half a trillion figure, though not a destination in itself, is nonetheless a good milestone to cross in India’s journey […]

Commercial Paper Market – Analysis

In our earlier article we had discussed the commercial paper product covering features, eligible issuer, investors, benefits and so on. The same can be accessed here. In this article we analyze the commercial paper market in India. Volumes : The monthly average issuance volume for the market over the past two years has been approximately INR 2 lakh crores. The commercial paper market touched a high of INR ~ 3 lakh crore issuances in August 2018 (just a month before […]

India’s foreign currency debt: To do or not to do, that is the question !

The announcement of the substantial increase in government borrowings has again brought forth the debate on Sovereign Foreign Currency Debt. The proponents have been giving various arguments in favour of the issuance including lower costs of borrowing, diversified investor base etc. Those arguing against such an issuance have been highlighting the risks associated with foreign currency denominated borrowings. In this article we have analysed both kind of arguments in detail. But let’s first understand what is meant by Foreign Currency […]

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