Elevated Yields

The signal from the bond market shows nervousness about govt borrowings

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OND YIELDS HAVE retraced after finance minister Nirmala Sitharaman reassured the markets that the government will not borrow more than what it has planned. The benchmark yield, which had hit a recent high of 6.60%, is now hovering around 6.4620%. The markets had been somewhat nervous thinking the government might need to borrow more than ₹14.8 lakh crore (gross) due to weak direct tax collections—gross tax receipts between April and July are up only 0.8% year-on-year due to the lower personal income tax collections. Moreover, there's the potential loss of ₹48,000 crore revenue for the current year after the goods and services tax (GST) rate rationalisation. A financial package for exporters, which is still in the planning stages, could mean additional government spends. The high supply of state loans was also weighing on investors. The government is obviously banking on buoyant demand to minimise the loss of revenue as GST cuts would make 99% of products cheaper. Also, households now have more purchasing