Live training

Session for
UTI AMC
Arjun Parthasarathy
Founder
INRBONDS.com

5/18/15

Agenda
Government Borrowing

Government Bond Yields

Corporate Bond Yields and Credit Spreads

Money Market Securities Yields

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Government Borrowing
Outstanding stock of government bonds 31st
March 2014 INR 37 trillion or USD 596 billion

Net addition to stock in fiscal 2014-15 INR 4.53

trillion or USD 72 billion

Bonds maturing in 2015-16 and 2016-17 - INR

1.76 trillion (USD 28 billion) and INR 2.31 trillion
(USD 37 billion)

Demand will be crucial to absorb supply

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Ownership Pattern

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5/18/15

Demand Dynamics
Banks deposit base Rs 80 trillion (USD 1.3 trilllon)

Growth in Bank Deposits 22% SLR Growth is Crucial

Demand Drivers- Higher FII limits, Insurance

Penetration, Higher PF Base and Retail Participation
through MF

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5/18/15

Government Bond Yields

Determined by Government Borrowing, Inflation
and Liquidity

Macro economic conditions key to bond yield

movements

Global factors equally important for bond yields

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Government Bond Yield

Curve

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State Development Loans

Outstanding SDL INR 10.9 trillion (USD 176
billion)

Fiscal 2014-15 borrowing INR 2.15 trillion (USD

34 billion)

States Hold INR 1.36 trillion ( USD 22 billion) of

T-Bills

Trade at spreads to government bonds Median

spread around 50bps

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SDL Spread Curve

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5/18/15

Corporate Bonds
Outstanding as of June 2014 INR 14.80 trillion
(USD 232 billion)

Insurance Cos and PFs investments at INR 11.65

trillion (USD 194 billion)

MF INR 2 trillion (USD 33 billion), FII INR 1.15

trillion (USD 19 billion)

Carries Interest Rate Risk, Credit Risk and

Liquidity Risk

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Corporate Bond Yields

Rating dependent with higher rating carrying lower
yields and lower rating carrying higher yields

Determined by Outlook for Interest Rates,

Corporate Debt Levels, Outlook for Economy and
Domestic and Global Liquidity

FIIs likely to turn major players in the market as

limits open up (currently USD 51 billion)
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Credit Spreads
Difference between corporate bonds yield and
government bonds yields of similar maturities
known as credit spreads

Highly volatile in times of financial market stress

Driven by liquidity more than any other factor

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Money Market Securities

Outstanding T-Bills as of Sep 2014- INR 3.42
trillion (USD 55 billion)

Outstanding CD/CP as of Sep 2014 INR 3 trillion

(USD 49 billion), INR 2.3 trillion (USD 38 billion)

Liquidity key component in levels of yields in

Money Market securities

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Money Market Security

Yields
Overnight rates (CBLO, Call and Repo and Term
Repos determine T-bill, CP/CD yields

RBI policy rate and system liquidity determine

overnight and term rates

Money market security yields are highly volatile

in times of liquidity stress

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Thank You
Information herein is believed to be reliable but Arjun Parthasarathy
Editor: INRBONDS.com and Zephyr Financial Publishers Private
Limited does not warrant its completeness or accuracy. Opinions
and estimates are subject to change without notice. This
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Copyright INRBONDS by Arjun Parthasarathy 2013

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