Yield on govt securities moderated sharply in Q1: Fin Min report

The additional public expenditure on account of the Covid-19 pandemic has pushed up government borrowing during the April-June quarter with the Centre issuing dated securities aggregating to Rs 3,46,000 crore as against Rs 2,21,000 crore in Q1 of FY20, according to quarterly report on public debt management brought out by the Finance Ministry.

As per the report, the weighted average yield of primary issuances showed a sharp moderation to 5.85 per cent in Q1 FY21 from 6.70 per cent in Q4 of FY20.

The weighted average maturity of new issuances of dated securities was lower at 14.61 years in Q1 of FY21 as compared to 16.87 years in Q4 of FY20.

During April-June 2020, the Central government raised Rs 80,000 crore through the issuance of Cash Management Bills, the report said.

The Reserve Bank of India conducted a special OMO involving simultaneous purchase and sale of government securities for Rs 10,000 crore each during the quarter ended June 2020. The net average liquidity absorption by the RBI under the Liquidity Adjustment Facility (LAF), including the Marginal Standing Facility and the Special Liquidity Facility, was Rs 4,51,045 crore during the quarter.

Total liabilities (including liabilities under the 'Public Account') of the government, increased to Rs 101,35,600 crore at end-June 2020 from Rs 94,62,265 crore at end-March 2020.

The report said that public debt accounted for 91.1 per cent of total outstanding liabilities at end-June 2020. Nearly 28.6 per cent of the outstanding dated securities had a residual maturity of less than 5 years.

The ownership pattern indicates a share of 39 per cent for commercial banks and 26.2 per cent for insurance companies at end-June 2020.

The yields on G-Secs showed a downward movement during the quarter ended June 2020. This reflected the impact of several developments, namely a sharp decline in crude oil prices during April 2020, reduction in the repo rate by 40 bps to 4 per cent by the Monetary Policy Committee on May 22, 2020 and surplus liquidity conditions in the market.

Central government dated securities continued to account for a major share of total trading volumes in the secondary market with a share of 74 per cent in total outright trading volumes in value terms during Q1 of FY21.