BORROWING BLUES FOR BOND MARKET

Higher than expected gross borrowings, heavy state issuances could hit liquidity and drive up benchmark yields

- Subhana Shaikh

Higher yields may greet traders as the government bond market opens on Monday, as a higher-than expected gross market borrowing programme and an elevated capital expenditure plan hang heavy.

"To finance the fiscal deficit, the net market borrowings from dated securities are estimated at ₹11.7 trillion. The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at ₹17.2 trillion," finance minister Nirmala Sitharaman said while presenting the Union budget for 2026-27.

According to the median estimate of 21 economists in a Bloomberg survey, gross market borrowing for FY27 was expected at ₹16.5 trillion and net borrowing, which excludes repayments, would be at ₹11.6 trillion. For FY26, the government had budgeted gross market borrowings of ₹14.8 trillion and net borrowing of ₹12.5 trillion.

"The overall gross and net borrowing numbers, along with the lack of any specific measures to address demand for bonds, will clearly weigh on market yields.... This remains a challenge and could keep yields elevated relative to underlying macroeconomic numbers," Rajeev Radhakrishnan, chief investment officer of fixed income at SBI Mutual Fund said.