ET NowIn an interview with ET Now, Killol Pandya - Senior Fund Manager- Debt, LIC Nomura Mutual Fund, shares his outlook on treasury. Excerpts:
ET Now: Do you think government borrowing numbers were pretty much on the expected lines?
Killol Pandya: Yes, it is pretty much in line with what was expected. Market participants are expecting close to 60% being the H1 borrowing plan, which has been the trend for many years now. So, there is no disappointment. There are no surprises there. The net borrowing is a tad lower than what was expected by the market participants. It is a little bit of good news. So all in all, 60% is the kind of mild frontloading which tends to take place for the annual borrowing.
It is pretty much in line with the market expectations and net borrowing is a tad lower. So far as this data point is concerned, it is positive for the bond markets per se.
ET Now: It could be a glass half full, glass half empty approach and if I follow a glass half empty approach, the fact that government borrowing programme is frontloaded is also an indication that the government is pretty confident or they are reasonably certain that corporate credit demand will not pick up in a hurry.
Killol Pandya: Yes, this was in fact discussed just yesterday at the summit of rating programme wherein the RBI deputy governor himself voiced concerns regarding corporate debt being crowded out by government borrowing. But I personally do not share that view. Of course, it is always a concern per se in the sense that it has to be watched, but these numbers are nowhere out of control or nowhere close to crowding out corporate debt per se. Our own bond market seems to have their own peculiarities, but they have been around for years in the sense that only a certain type of credit, especially AAA, dominates our bond markets.
90% to 95% of the trader volumes are in AAA papers or equivalents and lower rated papers tend to have little secondary market share. These are the peculiarities which are being shared by our bond markets for many years now. As a data point, we tend to watch how much is borrowing but a mild frontloading, that is to the tune of 60% of the total borrowing, is typical and the government tends to finish off with this borrowing sometime in the middle or end of February every year.
This is also typical of how the RBI has been borrowing on behalf of the government. So, I do not particularly subscribe to the view that this borrowing or the mild frontloading is going to crowd off corporate data. The government is counting on a slow pick-up in terms of corporate debt. I do not really see that to be the implication.
ET Now: Do you think government borrowing numbers were pretty much on the expected lines?
Killol Pandya: Yes, it is pretty much in line with what was expected. Market participants are expecting close to 60% being the H1 borrowing plan, which has been the trend for many years now. So, there is no disappointment. There are no surprises there. The net borrowing is a tad lower than what was expected by the market participants. It is a little bit of good news. So all in all, 60% is the kind of mild frontloading which tends to take place for the annual borrowing.
It is pretty much in line with the market expectations and net borrowing is a tad lower. So far as this data point is concerned, it is positive for the bond markets per se.
ET Now: It could be a glass half full, glass half empty approach and if I follow a glass half empty approach, the fact that government borrowing programme is frontloaded is also an indication that the government is pretty confident or they are reasonably certain that corporate credit demand will not pick up in a hurry.
Killol Pandya: Yes, this was in fact discussed just yesterday at the summit of rating programme wherein the RBI deputy governor himself voiced concerns regarding corporate debt being crowded out by government borrowing. But I personally do not share that view. Of course, it is always a concern per se in the sense that it has to be watched, but these numbers are nowhere out of control or nowhere close to crowding out corporate debt per se. Our own bond market seems to have their own peculiarities, but they have been around for years in the sense that only a certain type of credit, especially AAA, dominates our bond markets.
90% to 95% of the trader volumes are in AAA papers or equivalents and lower rated papers tend to have little secondary market share. These are the peculiarities which are being shared by our bond markets for many years now. As a data point, we tend to watch how much is borrowing but a mild frontloading, that is to the tune of 60% of the total borrowing, is typical and the government tends to finish off with this borrowing sometime in the middle or end of February every year.
This is also typical of how the RBI has been borrowing on behalf of the government. So, I do not particularly subscribe to the view that this borrowing or the mild frontloading is going to crowd off corporate data. The government is counting on a slow pick-up in terms of corporate debt. I do not really see that to be the implication.
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