MUMBAI: The central government plans to issue ₹8.2 trillion worth of government securities (G-Secs) in the first half (H1) of 2026-27 (FY27), the Reserve Bank of India (RBI) said on Friday.
The amount is lower than market expectations of ₹8.53 trillion to ₹8.85 trillion, dealers said.
Bond yields are expected to soften by 4-5 basis points on Monday, driven by the lower-than-expected borrowing for H1FY27.
Gross market borrowings in the Budget Estimate for FY27 were pegged at ₹17.2 trillion. “Since the Budget presentation, switches of G-Secs have been conducted, reducing gross market borrowing to ₹16.09 trillion,” the government said in a press release.
Of ₹16.09 trillion, ₹8.2 trillion (51 per cent) is planned to be borrowed in H1 through the issuance of dated securities, including ₹15,000 crore of sovereign green bonds.
Market participants observed that the issuance calendar is tilted towards shorter-tenor bonds, which could lead to some flattening of the yield curve.
“The borrowing calendar has come in slightly lower than market expectations, with a bias towards shorter-tenor issuances, which could result in some curve flattening. While Treasury bill (T-bill) borrowings are broadly in line with expectations, the lower overall supply should support bond yields in the near term, potentially leading to modest softening,” said a dealer at a primary dealership.
The government will also carry out switching and buyback of securities to smoothen the redemption profile. “The government will continue to reserve the right to exercise the greenshoe option to retain an additional subscription of up to ₹2,000 crore for each security indicated in the auction notifications,” the press release said.
The government plans to issue ₹2.88 trillion worth of T-bills in the first quarter (April–June) of FY27, in line with expectations, dealers said. Overall, T-bill borrowings for FY27 are projected at ₹1.3 trillion.
“The borrowing programme for H1FY27 is less front-loaded than in recent years, which may help temper the recent spike in yields. This is accompanied by a rise in the ways and means advances (WMA) limit. Yields would likely ease once the West Asia conflict resolves, and it may be prudent to defer some borrowings until then, although the timelines remain uncertain,” said Aditi Nayar, chief economist at Icra.
The RBI has set the WMA limit at ₹2.5 trillion for H1FY27 (April–September 2026), the central bank notified on Friday. It may consider fresh market borrowings once WMA utilisation reaches 75 per cent.
The government plans gross borrowings of ₹17.2 trillion via marketed, dated securities in FY27. After the RBI’s switch auctions, the gross borrowing for the year is expected to be around ₹16.04 trillion.
In the current financial year (2025-26), the government issued gross borrowings of ₹14.8 trillion worth of gilts.
Source: Business Standard
