Bond prices slip on confusion over govt borrowing plan

MUMBAI: Bond prices took a beating following the Interim Budget. The 10-year benchmark nearly touched the 6.5% mark, before recovering to close at 6.4%. The rupee also lost ground in line with the stock market losses and overall the dollar strength against major currencies. Liquidity was ample with banks parking more than Rs 49,000 crore of surplus funds with the RBI.

The Interim Budget on Monday outlined that the government planned to raise a record Rs 3.62 lakh crore against an estimated borrowing of Rs 2.6 lakh crore for the current fiscal. ���The estimated borrowings are more than what the market expected,��� said Ashish Vaidya, head of interest rate trading at HDFC Bank. ���But now all the focus is on the monetary policy. The mood in the coming days will be decided by the pace of the rate cuts,��� he said.

Dealers said that there was widespread confusion over the timing of the additional borrowing announced in the Interim Budget. However, a clarification from a finance ministry official cleared all the rumours. The official said that the government is likely to go for ���redemption of market stabilisation scheme (MSS) bonds��� to help to raise an extra Rs 45,000 crore to bridge its deficit.