Governments bond auction programme in March depends on size of LIC IPO

The government had earlier cancelled two auctions of government bonds scheduled on the 7th and 14th of February as it had sufficient cash.

Published: 23rd February 2022 07:55 AM  |   Last Updated: 23rd February 2022 07:55 AM   |  A+A-

IPO, initial public offering

Image used for representational purpose only. (File Photo | Express)

Express News Service

NEW DELHI:  After cancelling the sale of government bonds twice this month, the government has decided to go ahead with the scheduled Rs 23,000-crore sale of bonds on February 25. Macroeconomic and public accounts experts now believe that whether or not the government goes ahead with sale of bond in March would depend on the size and timing of the initial public offer (IPO) of public sector insurer Life Insurance Corporation of India (LIC).

The government had earlier cancelled two auctions of government bonds scheduled on the 7th and 14th of February as it had sufficient cash. The cancellation of bond sales helped cool down the yields on 10-years government bonds, which had breached 6.9% levels in the first half of February. 

The yields on 10-years government bonds are now trading at around Rs 6.75%. The government expects to raise Rs 8.75 lakh crore from the sale of bonds and treasury bills in 2021-22. However, a lot would depend on the size of the IPO of LIC, which is likely to be listed on the bourses in March.

Though the government has been tight-lipped on the size of the issue, the sense from the market is that the government is planning to raise in the range of Rs 60,000-70,000 crore. The government has set a target of raising Rs 73,000 crore from disinvestment. So far, it has only raised Rs 12,000 crore. If the government manages to raise anything upwards of Rs 70,000 crore, the government may not have to borrow as planned.

The government has raised the fiscal deficit target for the current financial year from the earlier 6.8% to 6.9% despite expectation of downward revision. Finance ministry officials had told TNIE that the upward revision in fiscal deficit was owing to confidence of spending departments which asked for more funds to be spent in the fourth quarter.


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